The retailisation of non-harmonised investment funds in ...ec.europa.eu/internal_market/investment/docs/other_docs/annex_non... · Appendices The retailisation of non-harmonised investment

Appendices

The retailisation of non-harmonised investment funds in the European Union(ETD/2007/IM/G4/95)

Prepared for European Commission DG Internal Market and Services

October 2008

PWC

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APPENDICES

APPENDIX A: Foreign exchange rates used ........................................................................ 6

APPENDIX B: Non-UCITS assets under management by asset class in the 9 countriesunder scope in 2006.................................................................................... 7

APPENDIX C: Regulatory frameworks................................................................................ 8

APPENDIX D: Taxation frameworks ................................................................................. 15

Appendix D1: Belgium................................................................................ 15

Appendix D2: France................................................................................... 19

Appendix D3: Germany............................................................................... 23

Appendix D4: Ireland .................................................................................. 29

Appendix D5: Italy ...................................................................................... 32

Appendix D6: Luxembourg......................................................................... 37

Appendix D7: Poland .................................................................................. 40

Appendix D8: Spain .................................................................................... 42

Appendix D9: United Kingdom .................................................................. 45

APPENDIX E: Market Survey............................................................................................ 50

APPENDIX E1: Participants’ profile .......................................................... 50

APPENDIX E2: Investor base split............................................................. 56

APPENDIX E3: Distribution channel ......................................................... 62

APPENDIX E4: Market dynamics .............................................................. 68

APPENDIX F: Questionnaire for fund managers ............................................................... 76

APPENDIX G: Questionnaire for distributors .................................................................. 121

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TABLE OF TABLES

Table 32 – Foreign exchange rates ........................................................................................ 6

Table 33 – Non-UCITS funds assets under management (in EUR m) in the 9 countriesunder scope at the end of 2006 ................................................................... 7

Table 34 – Minimum Investment threshold in France .......................................................... 9

Table 35 – Targeted and actual sample population ............................................................. 50

Table 36 – QM 8: Please precise the scope of your answers .............................................. 51

Table 37 – QD 9: What is the geographical scope of your responses? ............................... 53

Table 38 – Distributors surveyed offering non-UCITS funds by domicile ......................... 55

Table 39 – Fund Managers surveyed offering non-UCITS funds by domicile ................... 55

Table 40 – Unit-linked premium in European countries (in EUR million)......................... 66

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TABLE OF GRAPHS

Graph 35 – QM 7: What is your country of domicile? 50

Graph 36 – QD 8: What is your country of domicile? 51

Graph 37 – QD 7: Are you? 52

Graph 38 – QD 9: What is the geographical scope of your responses? 52

Graph 39 – QD 10: What is the total amount of assets under distribution (UCITS and non-UCITS funds)? 53

Graph 40 – QM 11: What kind(s) of non-UCITS funds do you manage? 54

Graph 41 – QD 12: What kind(s) of non-UCITS products do you distribute, sell orrecommand? 54

Graph 42 – QM20: Are your non-UCITS funds accessible to individual investors (HNWI,Mass affluent or retail investors)? 56

Graph 43 – QM20: Are your non-UCITS funds accessible to individual investors (HNWI,Mass affluent or retail investors)? 56

Graph 44 – QM 21-22: What was the final investor base split by non-UCITS funds netsales in 2006 and 2007? 57



Graph 47 – QM 14-15: In your opinion, what is the percentage of your non- UCITS AuMthat are directly and indirectly (in a wrapper format) held by retail investors at the end of2006 and 2007? 59

Graph 48 – QM 14-15: In your opinion, what is the percentage of your non- Ucits AuMthat are directly and indirectly (in a wrapper format) held by retail investors at the end of2006 and 2007? 60

Graph 49 – QM 20: Are your non-UCITS funds accessible to individual investors (HNWI,Mass affluent or retail investors)? 61


Graph 50 bis – QM 26-27: What was your distribution channel mix to reach individualinvestors in 2006 and 2007? 62

Graph 51 – QM 26-27: What was your distribution channel mix to reach individualinvestors in 2006 and 2007? 63



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Graph 55 – QM 37: What are the sales volumes of your non-UCITS funds that have beenoffered directly to individual investors through private placements and through publicofferings? (in EUR million) 65


Graph 57 – QD 46: Is the retailisation of non-UCITS funds a real trend and if so, is itprimarily driven by the demand or the supply side? 68

Graph 58 – QM 62: Is the retailisation of non-UCITS funds a real trend and if so, is itprimarily driven by the demand or the supply side? 69

Graph 59 – QM62 and QD46: Is the retailisation of non-UCITS funds a real trend and ifso, is it primarily driven by the demand or the supply side? 69

Graph 60 – QM62 and QD46: Is the retailisation of non-UCITS funds a real trend and ifso, is it primarily driven by the demand or the supply side? 70

Graph 61 – QM 63: Is the distribution of non-UCITS funds to retail investors one of yourstrategic objectives? 71

Graph 62 – QD 47: Is the distribution of non-UCITS funds to retail investors one of yourstrategic objectives? 72

Graph 63 – QM 63 & QD 47: Is the distribution of non-UCITS funds to retail investors oneof your strategic objectives? 72

Graph 64 – QM 63 & QD 47: Is the distribution of non-UCITS funds to retail investors oneof your strategic objectives? 73

Graph 65 – QM 65: If you do not currently offer non-UCITS funds to retail investors,would you plan to do so in the future? 73

Graph 66 – QD 49: If you do not currently offer non-UCITS funds to retail investors,would you plan to do so in the future? 74

Graph 67 – QM 82: Would a harmonised regulatory framework for the retail distribution ofnon-UCITS products be needed? 74

Graph 68 – QD 66: Would a harmonised regulatory framework for the retail distribution ofnon-UCITS products be needed? 75

Graph 69 – QM 82 & QD 66: Would a harmonised regulatory framework for the retaildistribution of non-UCITS products be needed? 75

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APPENDIX A: Foreign exchange rates used

The following foreign exchange rates have been used when converting figures in EUR.

Table 32 – Foreign exchange rates

31/12/2006 31/12/2007GBP/EUR 1.4852 1.3571USD/EUR 0.758 0.6794CHF/EUR 0.6216 0.6032

Source: Oanda

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APPENDIX B: Non-UCITS assets under management byasset class in the 9 countries under scope in 2006

Table 33 – Non-UCITS funds assets under management (in EUR m) in the 9 countriesunder scope at the end of 2006

Real Estate Private Equity

Hedge funds /

fund of hedge

funds

Other non-UCITS TOTAL

in EUR million 2006 2006 2006 2006 2006

Belgium 4,752 2,869 0 749 8,370France 14,900 25,500 39,501 23,000 102,901Germany 95,974 22,537 1,089 643,728 763,328Ireland 145,450Italy 25,273 15,365 24,723 4,933 70,294Luxembourg 8,057 15,311 104,464 204,643 332,475Poland 302 1,229 158 4,545 6,234Spain 8,888 9,347 n.a. 0 18,235UK 16,768 88,015 n.a. 9,737 114,520TOTAL 174,914 180,173 169,935 891,335 1,561,807

Split not available

Sources: BEAMA, AMF, AFG, BVI, IFIA, Assogestioni, ALFI, CSSF, Analizy Online, INVERCO, IMA, EVCA based on

PEREP_Analytics

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APPENDIX C: Regulatory frameworks

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FRANCE

Table 34 – Minimum Investment threshold in France

Note that specific investors are defined as investors without experience or large patrimony(less than EUR 1 million).

Asset Class Legal Vehicle Minimum Investment Threshold

OPCI No minimum.

OPCI RFA EUR 10,000 for specific investors (exceptfor a guaranteed OPCI RFA).

OPCI RFA EL EUR 30,000.

For specific investors: EUR 250,000.

Real Estate

SCPI No minimum

FCPR Via fast-track procedure: EUR 30,000.

For specific investors EUR 500,000.

FCPI Via fast-track procedure: EUR 30,000.

For specific investors EUR 500,000.

FIP Minimum investment is very low (fewhundreds EUR). However, to benefit fromtax advantages the minimums are EUR12,000 for a single person and EUR 24,000for a couple.

Private Equity

SCR No minimum

Contractual OPCVM EUR 250,000 for all investors.

However, it differs for some particularmarket players (i.e. EUR 30,000 forinvestors owning a financial patrimony ofat least EUR 1 million).

ARIA EUR 10,000.

For specific investors: EUR 125,000

ARIA EL EUR 10,000.

For specific investors: EUR 125,000

FCIMT EUR 10,000 for specific investors.

Hedge Funds

OPCVM of alternativefunds

EUR 10,000 (for specific investors), exceptfor a guaranteed OPCVM of alternativefunds.

FCC (Specification funds) EUR 500,000 (for specific investors andvia fast-track procedure).

FCP EUR 500,000 (for specific investors andvia fast-track procedure).

Other

SICAV EUR 500,000 (for specific investors andvia fast-track procedure).

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ITALY

Procedure for the issuing of the authorization

i) Application for the authorization

An application that includes the following information must be submitted for review:

- details of the applicant company;- name of the fund whose units are intended to be offered in Italy;- name of the subject entitled for the payments, name of the subjects appointed for

the distribution in Italy of the fund units, (if different);- full details of the person who executes the application and his/her powers;- a list of the documents attached to the application.

ii) Documentation to be provided

a) documentation related to the domestic regulatory supervision, which consist in adeclaration of the domestic supervision authority stating that:

- the fund and the management company are subject to the supervision authority andthe management company has an adequate corporate governance, administrativeand accounting structure; it must illustrate all the controls done towards themanaging company and toward the specific product;

- the fund currently offers its units in its home country;- the fund is compliant with its domestic provision related to the set-up of a

secondary seat in Italy, if the fund intends to set it up (it is not mandatory);- the managers of the fund hold the eligibility requirement foreseen by the Italian

legislation.

b) documentation related to the disclosure of information to the public, consisting ofthe following:

- a copy of the fund by-laws, or a copy of the by-laws of the investment company;- the latest offering circular (Prospectus) and the further offering documentation sent

to the domestic supervision authority, with a declaration of the same authority thatsuch documentation is the latest received for approval (should it be subject toapproval);

- the latest financial statements, if public;- detailed information as to the way of disclosing to the public all the costs related to

the units.

c) documentation related to the operating pattern, consisting of the following:

- a report on the operating pattern which the fund intends to adopt to offer its unitsand to ensure proper exercise of financial rights to its unitholders;

- a copy of the agreement with the subject appointed for the payments, with thesubject who is entitled to offer and distribute the units in Italy;

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- if a secondary seat is registered in Italy, with the task of dealing with the public, ithas to be provided its number of registration in the company register;

- a copy of the agreement with the Italian intermediary entitled to deal with thepublic (if existing);

- a list of the managers of the Italian secondary seat with a declaration of the powersto act on behalf of the company.

- the same documentation required by the Italian law proving that the eligibilityrequirement for fund managers are met.

d) other documentation, consisting of:

- an explanatory report about the operating pattern of the fund (as described further);- a document containing a brief description of the business plan of the fund.

After submission of the above mentioned documentation, Bank of Italy, after consultationwith Consob, is entitled to issue the authorization. The Bank of Italy will issue theauthorization within four months upon the receiving of the application. The term issuspended in the event the documentation provided is lacking of any relevant requirement;in this case Bank of Italy is entitled to ask for completions and the fund is informed of thesuspension of the above mentioned term.

iii) Operating pattern of the foreign non-UCITS fund

In order to issue the authorization, Bank of Italy – after consultation with Consob- isentitled to assess whether the operating pattern of the foreign fund matches the relevantpattern foreseen for domestic funds.

To allow this evaluation, the applicant fund must send an explanation report (see previousd) in which the following aspects are illustrated:

A- the features of the product offered:- the fund business plan and the associated risks;- type of investors to which the offer is addressed, both in its home country and in

Italy;- modality of participation to the fund, especially with reference to the issue and

redemption of the units;- the fund type, closed or open ended;- the legal structure of the fund;- the prudential investment rules;- the information given to the members;

B- the depositary:- the existence of a depositary to whom is entrusted the custody of the asset of the

fund. This subject must grant the same level of investor protection foreseen byItalian law.

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iv) Documentation and information to be provided to the public

The fund must keep publicly, both by the subject which is entitled for the offer and for thepayments, the following elements:

- the value of the single units of the quota/shares of the fund;- the information to be disclosed under its domestic law;- supplementary accounting information;- if the fund works under an operating agreement, the call notice of the meeting of

the members and the resolution adopted.

The foreign fund must furthermore publish, in at least one National daily-paper, the mostimportant above-mentioned information.

v) Operating pattern in Italy

Intermediation in the payments

In order to grant the exercise of the financial rights of the Italian members of the fund, andthe disclosure of the information above mentioned, the fund and the depositary must enterinto an agreement with one or several Italian banks (subject entitled for the payments), inorder to perform the intermediary activity in the payments connected to the participation tothe fund.

Relations with the investors

The relations between the Italian investors and the foreign seat of the fund are kept by apurposely appointed subject (the subject entitled for the payments, the secondary seat inItaly, an investment management company SGR, etc.)

In the event the units of the fund are only offered to qualified investors, Bancad’Italia shall authorize operative patterns different from the above-mentioned.

The appointed subject must:

- manage the activity of subscription and the request of redemption, received fromthe subject entitled for the placement;

- ensure the respect of the procedure given by the rules of the fund;- manage the relation with the investors providing periodic statements to the single

investors;- give to the member the certificate representative of the units, if foreseen;- keep the relation with the customers, included the managing of their claims;- care about the publication on the press of the above mentioned information.

Placement of the fund

The fund must enter into an agreement with he subjects appointed for the placement of theunits in Italy, these subjects must bind themselves to:

- send to the fund, the request of subscription, redemption and turning;- deposit by the subject entitled for the payments, the payments means related to the

subscription.

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IRELAND

Foreign schemes are not authorized by the Financial Regulator but must seek approval toinward market to retail investors and must comply with the provisions as listed withinFinancial Regulator’s notices for non-UCITS funds, in particular, NU19 & NU 9.

Foreign funds as outlined above seeking to market their units in Ireland must adhere to theconditions as listed under NU 19, the Financial Regulator’s non-UCITS Notices. CISwhich propose to market their units in Ireland must be authorised by a supervisoryauthority set up in order to ensure the protection of unit holders and which, in the opinionof the Financial Regulator, provides a similar level of investor protection to that providedunder Irish laws, regulations and conditions governing Irish CIS.

In addition to a review of the manager/ custodial functions, the Financial Regulator willalso undertake an assessment of the foreign fund’s investment objective, policies and riskspreading provisions to make a determination on its equivalency to an Irish CIS. ForeignCIS are compared to the detailed rules for domestic retail CIS and similarly professionalCIS to Irish professional CIS.

It is not uncommon for foreign funds seeking to inward market to be asked to complete thedomestic fund authorisation documentation with a view to measuring the specificdifferences between the domestic regulatory requirements and the foreign fund’sinvestment objectives. Any differences arising are reviewed on a case-by-case basis andimpact to the level of investor protection duly assessed to ensure this does not deviate fromthe standard set for domestic funds.

Under NU 19, a CIS situated in another jurisdiction which proposes to market its units inIreland must make application to the Financial Regulator in writing, enclosing thefollowing information and documentation:

- the full name of the CIS.- the full name and address of the operator.- the full name and address of any supervisory authority or authorities to which theoperator is subject in the state in which the operator is established.- the full name and address of the depositary or custodian.- the jurisdiction in which the fund is authorised.- details of the arrangements for the marketing of units in Ireland.- the full name and address of the establishment in Ireland (hereafter “facilities agent”)where facilities will be maintained where:

(i) unit holders can obtain payment of dividends and redemption or repurchase proceeds

(ii) they can obtain copies of the instrument(s) constituting the CIS, the prospectus, theannual and half-yearly reports can be examined, free of charge, and copies obtained ifrequired; and

(iii) complaints can be made for forwarding to the head office of the operator.

- a statement or certificate from the supervisory authority of the CIS confirming that it isauthorised.- a certified copy of the fund rules or instruments of incorporation.- the prospectus and any amendments thereto.

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- the latest annual report and any subsequent half-yearly report.- a copy of any other document affecting the rights of unit holders in the CIS.- confirmation from the facilities agent that he/she has agreed to act for the CIS.

Documentation submitted to the Financial Regulator must be in English or Irish or must beaccompanied with a translation in English or Irish. Marketing of units in Ireland may nottake place until the CIS receives a letter of approval from the Financial Regulator.

The following statement must be included in a prominent position in each copy of theCIS’s prospectus and in any marketing material distributed in Ireland for the purposes ofpromoting the CIS:

The prospectus of the CIS must provide the following information for Irish investors:

- details of the facilities agent and the maintained facilities;- provisions of Irish tax laws, if applicable;- details of the places where issue and repurchase prices can be obtained or are

published;- the minimum subscription requirement in the case of schemes which market solely

to professional investors.

CIS marketing their units in Ireland must comply with the provisions of the Code ofAdvertising Standards for Ireland. Schemes marketing their units in Ireland must complywith the provisions of the Code of Advertising Standards for Ireland. The code is availablefrom the Advertising Standards Authority for Ireland, 35/39 Shelbourne Road, Dublin 4.The standards are also outlined in the Financial Regulator’s Non-UCITS Notices, NU 9,under “Advertising”.

CIS marketing their units in Ireland must comply with the law, regulations andadministrative provisions in force in Ireland. (Financial Regulator’s Notices, relevantcompany law, advertising standards and the Regulator’s administrative provisions).

The annual and half-yearly reports issued by CIS marketing their units in Ireland must besubmitted to the Financial Regulator as soon as they are available.

When a CIS has received approval from the Financial Regulator to market units in Irelandthe name of the CIS and the name and address of the facilities agent will be placed on a listof CIS marketing in Ireland, which will be made available to public on request.

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APPENDIX D: Taxation frameworks

Appendix D1: Belgium

Taxation of ongoing income

- Non transparent funds:

Domestic funds

Distributions from a domestic opaque fund to a DRI (Domestic Retail Investor) would betreated as dividends subject to WHT at 15%. No further taxation would be suffered by theDRI.

A number of special regimes would apply:

- PRICAF/PRIVAK (i.e. private equity investment company mainly investing innon-quoted companies and growth companies): the portion of dividends distributedto a DRI corresponding to capital gains realised on shares by the PRICAF/PRIVAKwould be exempt from WHT.

- SICAFI/BEVAK (i.e. real estate investment company with fixed capital): dividendsdistributed to a DRI would be exempt from WHT should certain conditions be met(i.e. at the end of the financial year to which the dividends are referred, at least 60%of the immovable goods of the fund should be invested directly or indirectly inimmovable goods located in Belgium and affected to/ intended exclusively forhousing).

Foreign funds

Distribution from a foreign opaque fund to a DRI would be considered as foreign sourcedividends. Domestic WHT would apply on the net-frontier income (i.e. income afterforeign WHT). In principle, the rate for WHT would be 25%. However, municipalsurcharge would be added to these 25% where no WHT would have been retained in theabsence of a Belgian financial intermediary involved in the movable income payment.

A reduced WHT rate of 15% (plus municipal surcharge in absence of Belgian financialintermediary) would be applicable to certain distributions linked to shares issued as fromJanuary 1, 1994, which represent share capital and were subscribed in cash. This ratewould apply on the following:

(i) dividend distributions relating to shares issued in the context of a public offering, or,(ii) dividend of shares which were the object since their issuance:

- of a nominative inscription with the issuer (for nominative shares);- of an uncovered deposit in Belgium, under certain conditions, with a Belgian

financial institution subject to the control of the Belgian Banking, Finance andInsurance Commission (for bearer shares);

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- of an inscription in an account in Belgium, in the name of its owner, with asettlement entity or an accountholder which is entitled to hold such titles, under theconditions and procedures of application determined by Royal Decree (fordematerialised shares).

- Transparent funds:

Domestic funds

A Belgian WHT would in principle be retained (either by the Belgian debtor or by theBelgian management company of the fund) upon attribution of the underlying income tothe domestic fund. The tax rate would depend on the nature of the underlying income (i.e.25% on dividends except when a reduced rate of 15% or 10% would apply; 15% oninterest; in principle exemption for capital gains). No taxation would be suffered at thelevel of the DRI on distributions to the DRI.

Foreign funds

The application of tax transparency to foreign funds would be, among others1, subject tobreakdown filing requirements2. The breakdown identifies the nature and source of theincome received. Difficulties may however arise to provide the required evidence.

If a breakdown is provided, a Belgian WHT would be levied on the non-Belgian sourceincome (e.g. dividends, interest) only. The Belgian WHT rate on said non-Belgian sourceincome would then depend on the nature of the underlying income (i.e. 25% on dividendsexcept when a reduced rate of 15% or 10% would apply; 15% on interest; in principleexemption for capital gains). Indeed, Belgian source income should have normally alreadysuffered Belgian WHT upon attribution to the foreign fund. This WHT would be collectedby the Belgian financial intermediary. The capital gain component of the coupon couldbenefit from an exemption if satisfactory evidence with respect to the various componentsof the coupon would be provided.

Should this breakdown not be provided, the whole income distributed by the foreign fundwould become taxable as interest. This would entail: (i) a double taxation of Belgiansource income (i.e. as they would have already been subject to Belgian WHT uponattribution to the foreign fund), and (ii) the application of WHT at 25% on foreign sourceincome (which could have been subject to a lower tax rate if a breakdown of the couponhad been provided)3.

1 Whether or not a fund would qualify as a tax transparent entity constitutes a highly technical question whichtraditionally requires a so-called “lex societatis”/ “lex fori” approach. If the vehicle has legal personality from a localcorporate law perspective (“lex societatis”), the Belgian tax authorities would in principle agree to consider it as anopaque vehicle from a Belgian tax perspective. If not, the fund would be considered as tax transparent. If not clearenough, the question should be addressed by determining whether the vehicle presents legal characteristics that, from aBelgian corporate law perspective, are constitutive of legal personality (“lex fori”).Where the “lex societatis” test is not fulfilled, it is of common practice to introduce a ruling request with the Belgian taxauthorities in order to obtain comfort on the tax treatment of the fund.2 A Royal decree detailing the breakdown to be provided is foreseen, albeit not yet published.3 Until publication of the Royal decree (please, refer to note 3), it is unclear whether the former administrative guidelinesstating that a 15% Belgian WHT should be retained, is still applicable.

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Taxation of capital gains upon disposal of his units/ shares by the DRI

- Transparent and non transparent funds

Capital gains realised by a DRI upon disposal of his units/ shares in a domestic/ foreignfund would, in principle, be tax-exempt4. However, capital gains realised by a DRI with aspeculative aim could be taxable (even if it was considered as outside the exercise of anoccupational activity).

The income paid or attributed by a domestic/ foreign opaque guaranteed fund to a DRI,which is derived from shares upon the partial distribution of their assets or at the occasionof the redemption of their own shares, would be re-characterised as interest, assuming that,on the occasion of the public offer in Belgium of these shares, guarantees (relating to theamount to be reimbursed or the return on the investments) were entered into relating to aperiod equal to or inferior to 8 years.

Other taxes (e.g. net wealth tax, stamp duties)

To the best of our knowledge, as regards to taxes such as net wealth tax, stamp duties, etc,the same tax treatment would apply to DRIs in domestic and in foreign funds.

Cross-border taxation aspects

- Double Tax treaty

DRIs in domestic/ foreign transparent funds may benefit from a Double Tax Treaty(hereafter referred to as “DTT”) concluded between Belgium and the source country (i.e.the country from which the underlying income arises). In practice, this situation rarelyapplies as sufficient information would generally not be available. DTTs as such would notin general be applicable to foreign transparent funds as they would not in most cases beconsidered as Resident within the meaning of the DTT.

DRIs in a foreign opaque fund would only benefit from the provisions of a DTT if thisfund would qualify as resident within the meaning of the DTT. This condition would rarelybe fulfilled.

- Foreign tax relief

DRIs would only benefit from a foreign tax relief if a DTT would provide for such.

4 As regards foreign transparent funds, according to the current practice of the Belgian players based on administrativedoctrine, tax transparency principles are only applicable to distribution of income by such funds, and not torealised/unrealised capital gains/losses on units of such funds. Therefore, in practice, realized capital gains on units offoreign transparent funds are currently tax exempt, although this interpretation of the Belgian tax law is not fully correctfrom a technical point of view. This is currently debated on the Belgian market.

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- Controlled Foreign Corporations rules

Special consideration should be given to article 344 § 2 of the Belgian income tax code.This article is an anti-abuse of law provision stipulating the following:

“Legal acts of sale, cession or contribution to capital of shares, bonds, receivables,intellectual property rights or sums of money cannot be upheld towards the Belgian taxauthorities if such transfers are made to a non-resident taxpayer who, in the country wherehe is established, is not subject to tax on income or is subject to a tax regime on the incomegenerated by the income transferred that is markedly more favourable than that whichwould have been applied in Belgium on similar income. The taxpayer can refute this legalpresumption by proving that the transaction corresponds with legitimate financial oreconomic needs or that he received consideration for the transfer producing incomesubject to taxation in Belgium which, when compared to the taxation which would haveapplied had the transfer not taken place, may be considered as normal.”

This anti-abuse provision could theoretically apply (even if rarely used in practice), givensome foreign opaque funds are not subject to any income tax in their country of residence(e.g. Luxembourg SICAV).

Wrappers

Commonly used wrappers in Belgium would be unit-linked insurance products,derivatives, structured products.

The tax regime in the hands of the DRI would vary from products to products, and shouldbe analysed on a case-by-case basis.

At first sight, all other things remaining equal, there should not be major differences in thetax treatment at the DRI’s level between wrappers linked to Belgian funds and wrapperslinked to foreign funds.

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Appendix D2: France


- Domestic funds:

In absence of fund distribution, no taxation would be suffered at the DRI level irrespectiveof the fund being considered as tax transparent (as regards to investment in an FCP, theapplication of this differed taxation regime would be subject to the condition that no DRIwould hold more than 10% of the units in the FCP).

FCP and SICAV

Distributions to DRIs from domestic FCP and SICAV would be subject to taxation asincome from securities (“revenus de capitaux mobiliers”). The tax treatment would varydepending on the nature of the income received by the fund. A regime of tax transparencywould thus apply, albeit taxation would occur only on the income received by the DRI (i.e.differed taxation). Regarding DRIs in SICAV, the benefit of the differentiated taxtreatment as per type of income would be subject to conditions.

- Distribution of dividends: DRIs would be subject to tax at their marginal rate ofincome tax (i.e. up to 40%), plus 11% of social contributions (i.e. up to 51%). If theymeet certain conditions, DRIs would be able to benefit from several tax reliefsincluding a tax relief amounting to 40% of the dividend received. As from 2008,DRIs would be able to elect for taxation at a flat rate of 18% plus 11% of socialcontributions (i.e. 29%).

- Distribution of interest: DRIs would be able to elect for taxation at a flat rate of 18%plus 11% of social contributions (i.e. 29%). Otherwise, taxation would be suffered ata marginal rate of personal income tax.

- Distribution of real estate income: DRIs would be subject to the same tax treatmentas applicable for dividend distributions, albeit they would not be able to benefit fromany tax relief.

- Distribution of capital gains: DRIs would be subject to tax at 18% plus 11% of socialcontributions (i.e. 29%) if the annual amount of sales exceeds EUR 25,000.

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Other funds

- FCPR/ FCPI/ FIP/ SCR: if certain conditions are met, no taxation would occur at thelevel of the DRI on distributions from such a fund. Social contributions at a rate of11% would still be due.

- SCI/ FPI: distributions from such a fund would be taxed in the hands of the DRI asreal estate income (i.e. taxation at progressive rate of personal income tax up to 40%plus 11% of social contributions).

- SIIC/ SPPICAV: DRIs would suffer taxation on distributions from the fund under theregime applicable for dividend distributions. DRIs would be subject to tax at aprogressive rate of income tax up to 40% plus 11% of social contributions (i.e. up to51%) on 60% of the dividends (i.e. among others, tax relief of 40%). As from 2008,DRIs would be able to elect for taxation at a flat rate of 18% plus 11% of socialcontributions (i.e. 29%).

- Foreign funds:

Distributions from foreign funds would be taxed in the hands of the DRI as income fromsecurities (“revenus de capitaux mobiliers”) at a progressive rate of income tax, up to 40%,plus 11% of social contributions (i.e. up to 51%). A specific analysis would remainrequired depending on the vehicle/ country of residence.

Should the fund be considered as tax transparent from a domestic point of view, DRIswould be taxed on an arising basis (i.e. as the income arises to the fund, whetherdistributed or not).

Taxation of capital gains upon disposal of its units/ shares by the DRI

- Domestic funds

- FCP/ SICAV: DRIs holding shares/ units in domestic FCP or SICAV would besubject to tax under the normal regime applicable for capital gains (i.e. 29%including 11% of social contributions) if the annual amount of sales exceeds EUR25,000 for income received as from 2008.

- FCPR/ FCPI/ FIP/ SCR: capital gains realised by the DRI upon disposal of its shares/interest in such a fund would not be subject to taxation (if certain criteria are met).Only social contributions at 11% would be due.

- SCPI/ FPI: DRI would suffer taxation under the normal regime applicable for capitalgains derived from real estate companies (i.e. 27% including 11% of socialcontributions without any tax relief).

- SIIC/ SPPICAV: DRI would suffer taxation under the normal regime applicable forcapital gains (i.e. 29% including 11% of social contributions for income received asfrom 2008, if the annual amount of sales exceeds EUR 25,000).

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- Foreign funds

DRI would suffer capital gain taxation at progressive rate of personal income tax (up to40% plus 11% of social contributions).

Disposal of shares/ units in foreign FCP/ SICAV may be taxed at the flat rate of 29% if theannual amount of sales exceeds EUR 25,000 (including 11% of social contributions).As regards to the application of this tax treatment, a specific analysis would remainrequired depending on the vehicle/ country of residence.

DRI in foreign funds bearing comparable features than domestic FCPR/ FCPI/ FIP/ SCR/SCPI/ FPI/ SIIC/ SPPICAV would not benefit from the same tax treatment as thatapplicable to DRI in these domestic funds.

Other taxes

Securities held on January 1 may be included in the tax base for the net wealth tax(taxation at a progressive rate up to 1.8%).

DRIs in certain domestic funds (e.g. in a domestic FIP) may benefit from net wealth taxreliefs as regards to their investment in the fund. Investing in a foreign fund would notenable them to benefit from such reliefs.


- DTT

DRIs in domestic transparent funds (e.g. FCPR/ FCPI/ FIP/ SCPI/ FPI/ FCIMT/ ARIA/ARIEL/ SICAV/ FCP) would in principle benefit (from a French perspective) from theapplicable DTT between France and the source country, should transparency of thedomestic fund be recognised by the source country.

DTT would in general be applicable to DRIs in foreign opaque funds should the foreignfunds be considered as tax resident in its country (subject to the provisions of the relevantDTT).

A number of DTTs signed by France contain special provisions related to investmentvehicles.


DRIs may only benefit from a tax relief for WHT suffered abroad, if a DTT provides forsuch. If no DTT applies, the net income would be taxable in France.

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- CFC rules

CFC rules may apply if the investor holds more than a 10%-stake in an entity located in atax haven jurisdiction (section 123 bis A of the French tax code would provide for taxationin France of the income/ gain arisen in a tax haven territories, even in absence ofdistribution by the fund).

Wrappers

The most commonly used wrapper would be the “Individual Saving Account” (i.e. PEA).A special regime would be applicable for DRIs investing in PEAs (should certainconditions be met): no taxation would be suffered on income distributed to DRIs. Onlysocial contributions would be due (11%). This regime would be applicable to investmentswithin the EU. UCITS and French non-UCITS funds would be eligible under certainconditions. Foreign non-UCITS funds would not be eligible to this special regime.

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Appendix D3: Germany


Domestic funds

Scope of application of the Investment Tax Act:

For the application of the Investment Tax Act (hereafter refers to as “InvTA”) toregulated domestic funds a legal definition linked to the German Investment Act (InvA) isapplied:

If one of the two following types of investment funds is given, the InvTA is applicable:

1) Investment funds in form of a corporation/joint stock company(« Investmentaktiengesellschaft »):

Investment Stock Corporations are stock corporations investing and managing their fundsin accordance with the InvA (limitation of allowed assets, risk diversification). Theinvestors should have the right to redeem their shares.

2) Contractual type (« Sondervermögen »):

Mutual funds have to be managed by a management company for the accounts of theinvestors, with the management company being a company in the legal form of a stockcorporation or a limited liability company with its seat and head office in the scope of theInvA whose main purpose is the management of investment funds or the management ofinvestment funds and private asset management. Furthermore, the investors should havethe right to redeem their units.

InvTA applicable and reporting requirements fulfilled (transparent fund)

In order to allow investors to benefit from the most advantageous tax regime, certainreporting requirements need to be fulfilled by the investment fund: the tax relevant dataneeds to be published in the German federal gazette (“elektronischer Bundesanzeiger”)within four months after financial year-end of the investment fund. The information mustbe certified by a qualified person (e.g. tax adviser) in the meaning of the German TaxAdvisor Act.

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Taxation is based on the principle of transparency, i.e. the earnings at fund level are taxedat investor’s level.

a) In case of distributing funds, the earnings are split within their components (interestincome and other income, dividend income, foreign real estate income, capital gainsfrom shares, other capital gains). Distributed capital gains are not taxable in the handsof private investors.

b) In case of capitalizing funds, in the course of a deemed distribution of ordinaryincome at fund’s financial year-end the income is split into its components (interestincome and other income, dividend income, foreign real estate income). Capital gainsare not included in the taxable basis upon capitalization.

The taxation differs for the different types of income components (applicable regime forprivate investors until 31-12-2008):

Dividend income- 50% of dividend income is tax-exempt (deemed distributed income/distributed

income)- 20% domestic withholding tax (WHT) is applied on dividend income in case of

distribution and capitalization. An additional Solidarity Surcharge of 5.5% is appliedon WHT (21.1 % in total). The WHT can be imputed or deducted in the investor’stax return.

Interest income- Interest income is fully taxable (deemed distributed income/distributed income)- 30 % domestic WHT is applied on interest income in case of distribution and

capitalization. An additional Solidarity Surcharge of 5.5% is applied on WHT. TheWHT can be imputed or deducted in the investor’s tax return

Foreign real estate income- Foreign real estate income is tax-exempt as far as a Double Tax Treaty (DTT) is

applicable and allows for exemption- No domestic WHT on foreign real estate income applicable in case of treaty

exemption.

Capital gains- For private investors capital gains are tax-exempt upon distribution. Capital gains are

not included in the taxable basis upon capitalization.- No domestic WHT applicable on capital gains.

Income from transparent target funds falling in the scope of the application of theInvTA- The target fund’s income components (as published according to the requirements of

the InvTA) are included in the related income components at fund level, which ispassed on to investor’s level and received by the investor as one of the income typesmentioned above (full transparency).

- No specific WHT norm applicable.

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Income from non-transparent target funds falling in the scope of the application ofthe InvTA- The lump sum amount as described below is included in the taxable basis at fund

level and passed on to investor level as fully taxable income.- No specific WHT norm applicable.

InvTA applicable and reporting requirements NOT fulfilled (non-transparent fund)

No split into the different income components. Instead, at investor’s level a lump sumtaxation is applicable according to a specified formula, which refers to the higher amountof:- at least 6 % of the last redemption price in the calendar year or;- 70 % of the increase in market value within the calendar year plus the total

distributions in calendar year.The calculated lump sum amount and distributions received are fully taxable.

Foreign funds

Scope of application of the InvTA

For foreign funds the basis for the application of the InvTA is not a legal definition linkedto the German Investment Act (InvA) as for domestic fund, but the criterion of economicsubstance has to be analysed:

For foreign funds the InvTA is applicable if the following criteria are fulfilled:

- Investments in specific assets mentioned in the InvA- Concept of risk diversification- Common investment of unitholders- As from January 1, 2008 an additional criterion exists:- The investor should have the right to redeem the shares/units held

OR the investor has not the right to redeem the shares held, but the fund is subject toinvestment supervision in the country it is domiciled

The new criterion has an impact on the application of the InvTA:

- Entities qualifying as fund according to the old regime, but not the new one:- Application of InvTA ends at closing of the business year starting before

December 28, 2007- Entities, which did not apply the Investment Tax Act in the past (e.g. non-transparent

funds):- The new regime is applicable as from January 1, 2008

InvTA applicable for and reporting requirements fulfilled (transparent fund)

In case the InvTA is applicable, the taxation is nearly the same as for domestic funds:

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Dividend income- Same treatment as for domestic funds, but no domestic withholding tax (WHT)

applicable.

Interest income- Same treatment as for domestic funds, but only 30 % WHT plus Solidarity Surcharge

are withheld in case of distribution. The WHT can be imputed or deducted in theinvestor’s tax return

Foreign real estate income- Same treatment as for domestic funds.

Capital gains- Same treatment as for domestic funds.Income from transparent target funds falling within the scope of the application ofthe InvTA- Same treatment as for domestic funds.

Income from non-transparent target funds falling within the scope of the applicationof the InvTA- Same treatment as for domestic funds.

InvTA applicable and reporting requirements NOT fulfilled (non-transparent fund)

Same treatment as for domestic funds.

Taxation of income upon redemption/disposal of units/shares

- Redemption/disposal by the investor (applicable regime until December 31, 2008)

Domestic funds

The taxation of domestic non-UCITS funds depends on the fulfilled publicationrequirements:

a) InvTA applicable and interim profit published

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The following types of income are taxable upon redemption:

Interest income/Interim profit- The interim profit is the accrued interest income of the fund, which has not yet been

distributed or deemed to be distributed to the investor. The interim profit is calculatedand published together with the redemption price on each net asset value calculationdate. It is usually published in a widely-spread national newspaper.

- Redemption of fund units:The interim profit (included in the fund’s redemption price) is fully taxable andserves as basis for 30 % WHT in Germany. The WHT can be imputed or deducted inthe investor’s tax return.

- Subscription of fund units:The interim profit/interest income included in the fund’s subscription price atpurchase of the fund unit can be deducted as expenses.

Capital gain- Capital gain is only taxable in case the holding period is less than one year.- The taxable capital gain corresponds to the amount of the redemption price after

deduction of included interim profit.

b) InvTA applicable and interim profit NOT published

Interest income- In case the interim profit is not published, a lump sum interim profit is calculated on

a basis of 6 % of the redemption price taking into account the total holding period.The lump sum interim profit is fully taxable and serves as basis for 30 % WHT. TheWHT can be imputed or deducted in the investor’s tax return.

Capital gain- Capital gain is only taxable in case the holding period is less than one year.

Foreign funds

Same treatment as for domestic funds, but related to the interest income for capitalizingforeign funds the ADDI (Accumulated Deemed Distributed Income) is taken into accountadditionally as taxable basis for the WHT of 30 %.

The ADDI has been the Aggregated Deemed Distributed Income since 1993 and no WHTis applied in case of capitalizations of foreign funds. The ADDI is the basis for WHT. It isnot a real additional tax charge, but rather the basis for prepayment of taxes that arecreditable and deductible in the investor’s annual tax return.

Redemption/disposal by the fund

For the redemption of fund units/shares by a regulated non-UCITS fund, the same taxabletreatment as at investor’s level applies, except for capital gains, which are always treated astax exempt income for private investors, irrespective of the holding period.

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Outlook: Introduction of a Flat Rate Tax as from January 1, 2009

Investment Tax Act is applicable:

Distribution of fund:

Distributed income of the fund (including dividend income) will be taxable at a flat tax rateof 25 %.

Capital gains will be taxable in case of distribution, except for capital gain resulting fromsecurities purchased before January 1, 2009 and capital gains from real estate if the holdingperiod was not less than 10 years.

Foreign rental income is tax-free as long as it is provided for by an applicable Germandouble taxation treaty (DTT).

Capitalization/ Deemed distributions by the fund:

Deemed distributed income by the fund (including dividend income) will be taxable at aflat tax rate of 25 %, except of tax-free foreign rental income according to a DTT.

As per the old regime, capital gains will not be included in the deemed distributed income.

Disposal of fund shares/units:

In case of disposal, capital gains (i.e. amount of capital gain remaining after the deductionof the interim profit and deduction of the deemed distributed income, which was alreadytaxed before), are taxed at a flat tax rate of 25 % if the shares were purchased as fromJanuary 1, 2001.

Furthermore the investor is taxed based on the interim profit.

Other taxes

No specific tax treatment.

Cross-border taxation tax aspects

- The application of Double Tax Treaties has to be checked on a case-by-case basis.- The relief of foreign taxes is granted, as regulated non-UCITS funds for which the

InvTA is applicable are treated as transparent vehicles.CFC rules generally only apply in case the InvTA is not applicable.

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Appendix D4: Ireland


- Non transparent funds

Distributions of domestic funds to Irish investors would be subject to taxation at thestandard rate of income tax (currently 20%) should the distribution be considered as arelevant payment5 made annually or more frequently. If the payment is made lessfrequently than annually, taxation would occur at the standard rate of income tax plus 3%(i.e. 23%). This tax is accounted for by the fund.Distributions made by foreign corporate funds similar in all material respects to domesticregulated funds would be subject to the same tax treatment, where the details of thepayment have been included in the tax return. Otherwise, taxation would occur at themarginal rate of income tax, inclusive of health/ social welfare levies, or, in certain cases,at a 40% capital gains tax rate (this is not the case where the DRI invests in a domesticfund).A less favourable tax treatment could apply when a fund is located in a jurisdiction outsidethe EU/ OECD, which Ireland has no DTT with (e.g. Cayman Islands, Bermuda).

- Transparent funds

DRI’s investing in domestic transparent funds and in foreign regulated LimitedPartnerships would be subject to the same tax treatment as DRIs in domestic corporatefunds.

Foreign contractual funds and foreign unregulated Limited Partnerships would be viewedas tax transparent in Ireland. Investors in such funds would be treated as if they held thefund’s underlying investments directly.

Taxation of income upon disposal of its units/ shares by the DRI


Capital gains realised upon disposal of the DRI’s shares in a domestic fund or in a foreigncorporate fund would be subject to taxation at the standard rate of income tax plus anadditional 3% tax. This 23% tax (20% plus 3%) would be applicable upon disposal ofshares in a foreign fund, where details of the payment have been correctly included in thetax return (otherwise the DRI may be subject to tax at the marginal rate of income tax(41%)). Indeed, as regards to investments in a foreign fund, this tax is accounted for by theinvestor. For investments in domestic funds this tax is accounted for by the fund.

5 A relevant payment is defined in the Taxes Consolidation Act, 1997, as amended as a payment to aunitholder by a collective investment undertaking by reason of rights conferred on the unitholder as a resultof holding a unit in the collective investment undertaking other than a payment made in respect of acancellation, redemption or repurchase of a unit. In essence it generally relates to annual or more frequentincome distributions made from the fund to the unitholder.

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- Transparent funds

The tax treatment applicable upon disposal of shares in a corporate fund would beapplicable to the disposal of interest in a transparent entity.

- Deemed disposal regime

Finance Act 2006 introduced the concept of a deemed disposal (for units acquired as fromJanuary 1, 2001) whereby an Irish unitholder would be deemed to have disposal of his/herunits held in an investment undertaking every eight years from the date of acquisition ofsuch units. Any exit tax withheld on a deemed disposal would be available as a creditagainst the tax liability due on the ultimate disposal of units. The aim of this legislation isto prevent an indefinite roll-up/ accumulation of monies within the fund. Normally, this taxis accounted for by the fund. If the value of the number of chargeable units in theinvestment undertaking held by Irish resident investors is less than 10% of the value of thetotal units, the investment undertaking does not have to account for the tax (on deemeddisposals only). Unitholders would be required to return the gain directly to the IrishRevenue Commissioners on a self-assessment basis. Similar provisions apply in the case ofoffshore funds. In such cases, the investor would have to account for the tax under self-assessment rules.


From an Irish tax point of view, the same tax treatment would be applicable to DRIsinvesting in domestic and in foreign non-UCITS funds.


- Double Tax Treaty (DTT)

If there is a DTT in place, a refund can be available. It should be noted that funds do nothave the ability to access the DTT between Ireland and certain countries. Whether aparticular fund can access a DTT between Ireland and another country depends on theparticular treaty in question. In practice, the Irish tax authorities would in most casesrecognise foreign funds as qualifying persons under the terms of Irish DTT’s.

In the case of transparent funds, the DRI may be able to access the particular DTT as Irishtax law would look through the fund and recognise the investor as the beneficial owner.

Foreign tax relief

Foreign tax relief would only be available if a DTT provides for it.

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Wrappers

A common wrapper used would be an Irish life investment/ pension product investing intoa non-UCITS fund. No tax would be suffered at the life company/ pension fund level inrespect of the investment held in the underlying fund. Gains earned by the life company/pension fund from the investment in the underlying fund would not be taxable if they fallwithin the categories of “Exempt Irish Investor” (as set out in the Taxes Consolidation Act,1997, as amended) and have completed a declaration form to that effect. Gains earned bythe DRI in the life company would be liable to exit tax at 23% (standard rate tax plus 3%).

The tax treatment applicable at the level of DRIs is generally less favourable than directinvestment, particularly in the case of double tax relief. It should also be noted that indirectinvestment by an investor through a wrapper may not improve the investor access to thetreaty when compared to direct investment. Another issue to be aware of is that a retailinvestor may be able to invest in a QIF or a PIF if he/ she indirectly invests through awrapper (which in turn invests in a QIF/ PIF). In general, direct investment in a QIF or PIFis not possible for retail investors, as minimum subscriptions must be held by the investor.

There would be no difference in relation to the taxation of DRIs in domestic and foreignnon-UCITS funds from an Irish taxation perspective.

In relation to transparent funds, the Irish CCF (Common Contractual fund) does not applyto individual investors. In respect of foreign contractual funds, Irish tax would apply atinvestor level as the contractual fund would be transparent for tax purposes. All income/gains would be treated as arising to each investor. Where the wrapper is investing in aCCF, the life company/ pension fund may be treated as investing directly in the underlyingassets of the CCF. In practice the life company/ pension fund would have better treatyaccess compared to a fund.

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Appendix D5: Italy


Domestic funds

RE entities (Fondi Immobiliari, SIIQ and SIINQ6):

- RE FUNDS

The proceeds paid by the Italian RE funds to individuals engaged in their private capacityare subject to a definitive 12.5% WHT.

SIIQ and SIINQ

Provided that specific conditions are met, the SIIQ and SIINQ special tax regime providesfor:

- at the SIIQ/SIINQ level, the exemption of the income realized through the real estateletting/leasing activity from the Corporate Income Tax (Ires) and from the RegionalTax on Productive Activities (Irap);

- the obligation to distribute to the shareholders at least 85% of the net profit arisenfrom the exempted real estate letting activity performed by the SIIQ/SIINQ;

- the application of a 20%-WHT (15% WHT in case the profits are related to therentals of housing real estates signed according to art. 2 (3) of the law 431/1998) ondividends distributed to the shareholders related to the activity of the SIIQ/SIINQexempted from Ires and Irap. The WHT is levied as a definitive payment in case theinvestor is an individual in his private capacity.

Non UCITS funds (fondi non armonizzati7)

The proceeds relating to the units held in the domestic Investment funds (open-end andclosed-end) or in a domestic SICAV are not subject to any withholding tax at the momentof the payment to the individual investors.

As a general rule the open-end/ closed-end domestic investment funds and the domesticSICAVs are subject to a 12.5% substitutive tax levied on the accrued day-end portfolioappreciation.

6SIIQ: listed joint stock companies resident in Italy for tax purposes specialized in the real estates letting/leasing activity

which have opted for the SIIQ special tax regime;SIINQ: non-listed joint stock companies resident in Italy specialized in real estates letting/leasing activity which haveopted for the SIINQ special tax regime.7 The Italian tax law does not provide for a specific tax regime applicable to the domestic hedge funds or private equity.Therefore, it must be made reference to the specific tax regime applicable in case of qualification of the Domestic Hedgefund/PE as an (i) open-end domestic investment fund (ii) closed-end domestic investment fund (iii) domestic investmentfund which invest in “substantial shareholdings” or as a (iii) SICAV.

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Special regime of domestic investment funds investing in “substantial shareholding”8

The proceeds relating to the units held in the domestic investment funds, which invest in“substantial shareholdings”, are not subject to any withholding tax at the moment of thepayment to the individual investors.

Domestic investment funds which invest in “substantial shareholdings” are subject to asubstitutive tax applied on the accrued day-end appreciation. The substitutive tax applies:

- at the rate of 27%, exclusively on the specific part of the NAV appreciation accruedin relation to the capital gains realized by the fund through the disposal of the“substantial shareholding”; and

- at the rate of 12.5%, on the specific part of the NAV appreciation in relation to (i) theother investments (such as the “non substantial shareholding”) and (ii) the dividendsreceived by the fund in relation to the “substantial shareholdings”.

Foreign funds/Entities:

RE entities (Fondi Immobiliari, companies investing in RE)

RE FUNDS

The proceeds paid in respect of direct investment in foreign RE funds’ units placed oroffered in Italy are subject to a 27% Italian definitive WHT.

No specific rules for foreign RE funds offered abroad are provided by the Italian tax lawand no specific clarification have been issued by the Italian tax authorities.

COMPANIES INVESTING IN REAL ESTATE

In case they are characterized as corporations for Italian tax purposes9, the dividendsdistributed in relation to the “non-substantial shareholdings” are subject to a definitive12.5% WHT in case the investors are individuals acting in their private capacity.

The dividends paid to the individuals, acting in their private capacity, in relation to the“substantial shareholdings” held in the Foreign Companies under analysis are subject to aprovisional 12.5% WHT on the 40% of their amount (dividends relating to income yieldedas from 2008 on, are subject to a provisional 12.5% WHT on the 49.72% of their amount).Subsequently, 40% of the dividends on the “substantial shareholdings” (49.72% fordividends relating to income yielded from 2008 on) will be included in the investor’s taxreturn and subject therein to the progressive tax rates (from 23% to 43%) (60% exemptedfrom taxation or 50.28% exempted from taxation for dividends relating to income yieldedfrom 2008 on). The 12.5% provisional WHT is creditable against the personal income tax.

8 The mentioned tax regime applies exclusively in case (i) the number of investors (investing in the mentioned fund) islower than one hundred (100) or (ii) in case the units/quotas held by the “qualified investors” (other than the “individualqualified investors”) exceed 50% of the total amount of the units issued by such funds.

9 The Italian tax authorities have not clarified yet whether the mentioned Foreign Companies investing in RE must bequalified as “foreign corporations” or as “foreign RE funds”.

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Foreign non-UCITS investment funds, foreign non-UCITS SICAVs10 and foreignhedge funds

At the investor level, there is the taxation of the proceeds as income from capital, subject toordinary taxation at personal income tax rate (progressive rate from 23% to 43%). If anItalian paying agent is involved, a provisional 12.5% WHT must be levied but is creditableagainst personal income tax.

Taxation of capital gains upon disposal of his/her units/ shares by the DRI

- Domestic funds

RE entities (Fondi Immobiliari, SIIQ and SIINQ)

RE FUNDS

Capital gains realized by the investor in his private capacity through the disposal of units ina domestic RE fund are subject to a 12.5% substitutive tax.

SIIQ and SIINQ

Capital gains realized by the investor in his/her private capacity through the disposal of“substantial shareholdings” in a SIIQ/SIINQ are wholly subject to tax under the investor’sself assessment regime (i.e. the investor will specify the capital gains in his tax return and,therein, the mentioned capital gains will be subject to the progressive tax rates).

Capital gains realized by the investor through the disposal of “non-substantialshareholdings”11 in a SIIQ/SINQ are subject to a 12.5% substitutive tax.

Non UCITS funds (fondi non armonizzati)

Capital gains realized by the investor in his/her private capacity through the disposal ofunits in a domestic fund is subject to a 12.5% substitutive part.

Special regime of domestic investment funds investing in “substantial shareholding”

Capital gains realized by the investor in his/her private capacity through the disposal ofunits in a domestic investment fund investing in “substantial shareholding” is subject to a12.5% substitutive tax.

10 The Italian tax law does not provide a specific rule for the qualification of the foreign non-UCITS SICAVs as “foreignnon-UCITS funds” or as “foreign companies”. Also for tax purposes, reference should be made to the “regulatoryqualification” of the SICAVs. The Italian tax authorities have specified, concerning the Participation Exemption regime,that the mentioned regime cannot be applied in relation to the quotas/ units held in domestic SICAVs, because from a taxpoint of view the domestic SICAVs are treated as the domestic Investment funds.11 “Non substantial shareholdings” are those shareholdings that represent voting rights in the shareholders’meeting not higher than 20% and participation in the share capital not exceeding the 25%. For shares incompanies listed on a stock exchange, the mentioned percentages are reduced, respectively to 2% (votingrights in the shareholders’ meeting) and 5% (participation in the share capital).

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- Foreign funds

RE entities (Fondi Immobiliari, companies investing in RE)

RE FUNDS

Capital gain realized by the investor in his/her private capacity through the disposal ofunits in a foreign real estate fund is subject to a 12.5% substitutive tax.

COMPANIES INVESTING IN REAL ESTATE

In case they are characterized as corporations12, the capital gains realized by individuals,acting in their private capacity, are:

- subject to a 12.5% substitutive tax, in case of “non-substantial shareholdings”; and- subject to the progressive tax rates (from 23% to 43%) in the investor’s tax return for

40% of their amount (or 49.72% of their amount for the capital gains realized fromJanuary 1, 2009 on), in case of “substantial shareholdings”, if case certain conditionsare met.

Foreign non UCITS funds, foreign non-UCITS SICAVs13 and foreign hedge funds

The same substitutive tax of 12.5% applies on capital gains with respect to both foreignnon-UCITS funds and domestic ones.


From an Italian tax point of view, the same tax treatment would be applicable to DRIsinvesting into domestic and into foreign non-UCITS funds.


- DTTConcerning foreign non-UCITS funds, given that they are not often subject to tax in therelating country of residence, as a general rule, they cannot benefit from a DTT. However,a case-by-case analysis should be performed in order to ascertain whether the foreign non-UCITS funds can benefit of the DTTs.With reference to the domestic funds/entities: (i) the SIIQ, the SIINQ and the domestic REfunds can not benefit of the DTTs because the taxation does not apply at theSIIQ/SIINQ/fund level but at the investor level, (ii) on the other hand, the domestic non

12 The Italian tax authorities have not clarified yet whether the mentioned Foreign Companies investing in REmust be qualified as “foreign corporations” or as “foreign RE funds”.13 The Italian tax law does not provide a specific rule for the qualification of the foreign non-UCITS SICAVsas “foreign non-UCITS funds” or as “foreign companies”. Also for tax purposes, reference should be made tothe “regulatory qualification” of the SICAVs. The Italian tax authorities have specified, concerning theParticipation Exemption regime, that the mentioned regime cannot be applied in relation to the quotas/ unitsheld in domestic SICAVs, because from a tax point of view the domestic SICAVs are treated as the domesticInvestment funds.

36

UCITS fund which are taxed at the fund level, in principle, should be entitled to benefitfrom a DTT.


In case of a withholding tax levied in the State of source on proceeds relating to non-UCITS funds or on dividends relating to “substantial shareholdings” held by the investor ina foreign company investing in real estate (which should be subject to the progressive taxrates in the investor’s tax return), it is possible for the investor to credit it against hispersonal income, applying the specific regime according to the art. 165 of the ItalianConsolidated Income Tax Act. Under this regime, in case the foreign source proceeds/dividends are partially exempted from the investor’s personal income taxable basis, theforeign WHT levied on the proceeds/ dividends, deductible from the personal income tax,must be reduced accordingly. However, it is not usual to apply this mechanism on theWHTs levied on the proceeds paid by foreign non-UCITS funds.

With reference to the units held in domestic non-UCITS funds, the DRI cannot credit orrefund the WHT/ substitutive tax levied on the proceeds and capital gains which generallyapply as definitive taxes.

- Specific tax obligations

Due to the “external monitoring system”, the Italian intermediaries, interposed in thepayment of foreign source proceeds from foreign entities (e.g. non-UCITS funds or foreigncompanies investing in real estate) to the investors, are obliged to report the payment to theItalian tax authorities.Investors, due to the mentioned system must specify in their tax return each transfer ofmoney, shares or securities, exceeding EUR 10.000, executed between Italy and anotherState as well as investments and financial activities, exceeding the EUR 10.000, heldabroad.

Wrappers

As a general rule, in case of indirect investment in the domestic and foreign non-UCITSfunds through “wrappers”, the direct investment will be taxed (i.e. the “wrapper”)according to its specific tax regime.The most commonly used “wrappers” are the profit linked bonds (PLB) with an expirationperiod of at least 18 months, the domestic RE funds (in case the underlying is a foreign REfund), the insurance policies, and the UCITS funds.

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Appendix D6: Luxembourg



Dividends or interest distributed from non-transparent funds (SICAV/F Part II funds orassimilated foreign non-UCITS funds) to retail investors are subject to a progressive taxrate, upon filing the tax return. The maximum marginal rate to which these distributionscan be liable for is currently of 38.95% and an additional 1.4% of social contributions.Partial exemption of income is available, i.e. EUR 1,500 for singles and EUR 3,000 formarried couples.

Distributions made by foreign non-UCITS funds and by domestic non-UCITS fundsreceive the same tax treatment in Luxembourg.

No Luxembourg taxation arises in the absence of any distribution by a SICAV/F or anassimilated foreign fund. In principle, neither the EU Savings Directive, nor the internalLuxembourg withholding tax is applicable on interest payments served by a non-transparent entity.

- Transparent funds

Dividend distributions from transparent funds (FCP Part II funds or assimilated foreignnon-UCITS funds) are, in theory, taxed on 50% of the gross dividend, if the latter isreceived from an EU non-transparent fully taxable company or from a non-transparentfully taxable company located in a State with which Luxembourg entered into a DTT,following the transparency principle. Still, the marginal rate cannot exceed 38.95% and anadditional 1.4% of social contribution.

Interest received from transparent funds is subject to progressive income tax rates in thehands of the investor, with a maximum rate of 38.95% and an additional 1.4% of socialcontribution.

For both, dividends and interest, the tax credit method/ effective rate method (dependingon DTT provisions) is not applied and partial exemptions of income are available(i.e. EUR 1,500 for singles; EUR 3,000 for married couples).

Interest may be subject to withholding tax and a final tax charge in Luxembourg if it ispaid by an EU paying agent on behalf of funds qualifying for the EU Savings Directivewhich are located in an EU country, the latter having opted for the withholding taxmechanism. However, domestic withholding tax on interest is not applicable.

38

Taxation of income upon redemption/ disposal of units/ shares

Upon redemption/ disposal by the investor

- Non transparent fundsIn principle, capital gains realised by the investors may enter one of three distinctclassifications. Speculative income occurs when the redemption/ disposal of the units/shares takes place within 6 months of the acquisition. It is taxed at a progressive incometax rate, with the maximum marginal rate being 38.95%. Extraordinary income, arising if aminimum shareholding of 10% of the fund’s capital is being held for a period exceeding 6months, is taxed at half the marginal income tax rate (i.e. maximum of 19.475%). Finally,income, which is derived form the redemption/ disposal of units/ shares held for more than6 months, but not qualifying as an important shareholding (10% threshold), is taxexempted.

The same taxation treatment applies to capital gains derived from domestic and foreignnon-UCITS funds.

- Transparent funds

Capital gains derived from the redemption/ disposal of units/ shares in a domestic or aforeign transparent fund are treated on an equal basis. They are subject to the same taxationas non-transparent funds, depending on their classification into speculative income,extraordinary income, or exempted income.

Upon redemption/ disposal by the fund


Upon redemption/ disposal by the non-transparent fund itself, whether domestic or foreign,the income will only be subject to tax (dividend/ interest) if the income is effectivelydistributed.

- Transparent funds

In case of redemption/ disposal by the domestic or foreign transparent fund, the derivedincome is in principle treated as in the case of direct investment: taxation is due ondividends, interest, and capital gains.

Other taxes

No net wealth tax (NWT) is levied on income for Luxembourg tax resident individuals asof January 1, 2006. Therefore for DRIs, the same tax treatment applies whether they investin domestic or foreign non-UCITS funds.

39


- Double Tax Treaty (DTT)

Due to their transparency status, FCPs do not qualify for Luxembourg DTT benefits.Nonetheless, investors in an FCP may claim the relevant DTT relief as individuals, if theFCP is regarded as a transparent entity by the country of investment’s tax purposes.SICAV/F could benefit from a certain number of DTTs (26) signed by Luxembourg.In principle, foreign funds do not benefit from the provisions of Luxembourg DTTs, unlessthe funds are assimilated to Luxembourg resident funds.


No foreign or local tax credits are transferred with respect to the distributions made by aSICAV/F or by any assimilated foreign fund. In principle, and in accordance with thetransparency of an FCP, any tax credit should be transferable.

Wrappers

- Life insurance

Life insurance is a common wrapper used in Luxembourg for domestic or foreignnon-UCITS funds. The tax treatment of foreign non-UCITS funds, eligible for lifeinsurance contracts, is identical as for investments in domestic non-UCITS funds via lifeinsurance.Taxation of life insurance contracts in units occurs upon distribution; a full exemption isgranted when capital is paid out, while a 50% exemption is applicable if a pension isserved under certain conditions. Premiums may be deductible, depending on the situation.

- Fiduciary agreement

One of the most frequent wrappers used in Luxembourg is the fiduciary contract.Foreign non-UCITS funds are eligible for fiduciary contracts. In such a case, theLuxembourg tax treatment is identical for investments into foreign non-UCITS funds anddomestic funds (irrespective of EUSD potential implications). No tax impacts apply tofiduciary agreements; the DRI encounters the same tax treatment for direct and indirectinvestment.

40

Appendix D7: Poland


Domestic funds

All domestic funds would be non transparent.

Distributions from domestic funds to DRIs would be treated as capital gains subject to aWHT at 19%. No further taxation would be suffered on distributed income.

Foreign funds

Poland would recognise the tax transparency of a foreign fund based on an analysis madeby the foreign country. Albeit that, taxation would not occur on an arising basis, but on thedistributed income. From a practical standpoint, the same tax treatment would thus applyto foreign transparent and opaque funds.

Distributions from foreign funds to DRIs would be treated as “income from other sources”subject to progressive tax (i.e. 19% to 40%) in the hands of the DRI.

Taxation of capital gains upon disposal of his units/ shares by the DRI

Domestic funds

Capital gains realised by a DRI upon disposal of its participation in a domestic fund (i.e.opaque fund as all domestic funds would be non transparent) would be subject to WHT at19%.

Foreign funds

Capital gains realised by a DRI in a foreign fund (whether transparent or opaque) would betreated as “income from other sources” subject to taxation at a progressive rate (i.e. 19% to40%) in the hands of the DRI.

Other taxes

The purchase of participation rights in foreign funds (unlike in domestic funds) may besubject to the civil law activities tax in Poland under certain conditions.

Generally, an agreement of sale of property rights (to include sale of shares, sharecertificates issued by the collective investment vehicles, etc) is subject to civil lawactivities tax (at a 1% rate). However, in case of titles issued by a non-Polish entity, the taxwould be due only if the below conditions were jointly met:

(i) the titles were acquired by Polish residents,(ii) the sale agreement would be concluded on the territory of Poland.

In such a case, the purchaser would be responsible for paying the tax.

41

Additionally, please note that in some cases (when the titles are sold by - or with anintermediary of - a broker or an investment company or within an organized share tradingsystem on the territory of Poland) no civil law activities tax would arise.


- DTT

DRIs in foreign opaque funds would generally benefit from the provisions of DTTsconcluded between Poland and the foreign country, should the foreign country recognisethis fund as resident within the meaning of the DTT (i.e. based on the analysis made by theforeign country).

DRIs in foreign transparent funds would generally benefit from DTTs concluded betweenPoland and the source country.

- Foreign tax relief:

When a DTT is applicable, a relief of foreign WHT is granted if the provision of the DTTprovides for such a case.

- CFC rules:

No CFC rule is applicable in the case of an investment made by a DRI.

Wrappers

Most commonly used wrappers would include insurance products (subject to 19% WHT)and individual pension accounts (tax-exempt up to certain limits and subject to 19% WHTabove these thresholds).

DRIs in wrappers would broadly be subject to similar tax treatment as direct investment ina fund (the exemption thresholds for individual pension accounts would be quite low).

Foreign funds would generally be eligible to these wrappers, although their tax treatmentwould not be identical (e.g. foreign unit-linked insurance products would literally besubject to progressive tax from 19% to 40%).

42

Appendix D8: Spain


The fact that the foreign fund is a RE or a HF is not relevant with respect to the analysis ofits taxation (assuming that DRI does not hold a significant stake).

PE funds were not included in the study (as from the regulatory side) since they arecategories of products which are not subject to Spanish legislation on UCITS and non-UCITS products.

The concept of UCI (either in transferable security or in other category of assets) is onlyprescribed for UCITS and non-UCITS product categories under Spanish Law 35/2003 andits enabling regulations. On the contrary, Venture Capital and Private Equity areconsidered as financial institutions for Spanish regulatory purposes.

Domestic funds and foreign non-transparent funds

Distributions from domestic funds and foreign opaque funds (if applicable) would besubject to WHT at 18 %. Final taxation at income tax would then be suffered at the DRIlevel. The WHT would be creditable against the DRI’s income tax.

Foreign transparent funds

Foreign contractual funds would be considered as “income attribution” entities. A greyarea occurs in respect of their tax regime. Nevertheless, such funds are likely to beconsidered as co-ownerships. They would be subject to a kind of fiscal transparency. DRIswould be seen as obtaining directly the underlying income and gains/ losses, proportionallyto their participation in the fund. These income/ gains would be taxed at personal incometax on a yearly basis, at the flat tax rate applicable to dividends, interest income and capitalgains (i.e. 18%).

Funds incorporated in tax haven territories

Distributions from a fund incorporated in a jurisdiction considered a tax haven would besubject to WHT (if applicable) at 18% creditable against the final taxation.A regime of “deemed distributions” would be applicable to foreign funds incorporated in atax haven territory. It is assumed that the increase would be of 15% of the acquisition costunless a proof to the contrary is produced. Final taxation at progressive rates (i.e. from 24to 43%) would then be suffered by the DRI.

Some Member States of the European Union may be considered tax haven jurisdictions.A black list has been issued (Royal Decree 1080/1991). Cyprus would be on this list aswell as Luxembourg as regards to certain funds which do not comply with certainconditions.

This special regime is not applicable to Private equity/venture capital funds incorporated intax haven jurisdictions. The taxation for those funds would only depend on their legalstatus no matter their jurisdiction of incorporation.

43

Taxation of capital gains upon disposal of its units/ shares by the DRI

Domestic funds and foreign non transparent funds

Capital gains realised by a DRI upon disposal of his/her shares in domestic funds andforeign opaque funds would be subject to WHT at 18 %. Final taxation would then besuffered at the DRI level. The WHT would be creditable against the DRI’s income tax.ETFs (i.e. domestic vehicles regulated in art. 49 of regulations of law 35/2003) and PrivateEquity/venture capital funds would not be subject to WHT upon realisation of capitalgains.

Switches between domestic funds may be tax-free (Roll over/ deferral regime). This wouldnot concern switches between foreign funds, domestic ETFs or private equity/venturecapital funds.

Transparent funds

No taxation would occur upon disposal by the DRI of its units in “income attribution”entities (e.g. foreign contractual funds).

Funds incorporated in tax haven territories

DRIs would be subject to WHT at 18% creditable against final taxation upon disposal ofunits/ shares in a fund incorporated in a tax haven jurisdiction. Final taxation at progressiverates (i.e. from 24 to 43%) would then be suffered by the DRI. Capital gains would becomputed on the difference between the disposal and the acquisition price, considering theprofits already received and the annual “deemed distribution”.

This special regime is not applicable to Private Equity/venture capital funds incorporatedin tax haven jurisdictions. The taxation for those funds would only depend on its legalstatus no matter its jurisdiction of incorporation.


Spanish tax law would not make penalising distinction between domestic funds and foreignopaque funds as regards taxes such as net wealth tax or stamp duties.A distinctive tax treatment may occur as regards to investment in foreign contractual funds.


- DTT

DTTs concluded by Spain would in general be applicable to foreign funds to the extentthey are subject to tax in their country of residence. From a practical standpoint, theapplication of the DTT provisions would be possible only if the fund would obtain acertificate of residence issued by the tax authorities in its country of residence (within themeaning of the Treaty).

44

Several consultative documents issued by the Spanish tax authorities would considerforeign transparent funds as non-resident of a Contracting State in the terms of the DTT.These funds would indeed not be taxed in that State, their partners being directly taxed.


In absence of a relevant DTT, no penalising double taxation should be suffered by the DRIas unilateral double taxation relief would be available under Spanish legislation. This reliefwould be granted up to an amount corresponding to the lower of: (i) the taxation sufferedabroad, or (ii) the amount corresponding to the tax that would have been levied byapplication of the average personal income tax rate on the distribution or on capital gain.

- CFC rules/ formalities

As previously mentioned, the taxation of investment in foreign collective investmentinstitutions incorporated in tax haven jurisdictions would be different from the oneapplicable to investment in domestic funds/ foreign opaque funds (not incorporated in a taxhaven territory) (Law 35/2003). Furthermore, foreign funds of a contractual nature may besubject to the “income attribution” regime.

“Income attribution” entities (e.g. contractual foreign funds) would be obliged to submit aninformative tax return identifying the investors, the total amount of the income obtained bythe entity and attributed to each investor, tax credits, withholdings taxes and their turnover.This obligation may be complied with by the DRI.

Wrappers

Broadly speaking the tax treatment would be the one applicable to the wrapper product.

45

Appendix D9: United Kingdom



Domestic funds

Authorised Unit Trusts (AUT)14

Dividend distribution

- Dividend distribution by an AUT is not subject to WHT.- DRIs are taxed on dividend paid out from an AUT at a rate of 32.5% (with 10% tax

credit).

Interest distribution

- Interest distribution is subject to a 20% withholding tax (reclaimable by exempt taxpayers).

- DRIs are taxed at 40% on interest received from a bond fund (with 20% tax creditwhere the tax was deducted at source).

Open-Ended Investment Companies (OEIC)15

Dividends distribution

- No WHT on dividend distributed by an OEIC- DRIs are taxed on dividends received at rate of 32.5% (with 10% tax credit).

Interest distribution

- WHT is deducted on interest distributions made to DRIs at 20%.- DRIs are subject to tax at 40% (with 20% tax credit where the tax was deducted at

source).

Unauthorised Unit Trusts (UUT):

- Distributions to DRIs are made net of 20% WHT.- Tax-exempt payers can reclaim the withheld tax

14 Distributions from OEICs and AUTs can be made either as a dividend payment or as an interestdistribution. Interest distributions can be made only if the qualifying investments (broadly interest bearingdebt assets) test is met. That is, at all times throughout a distribution period the market value of the qualifyinginvestments exceeds 60% of the market value of all investments, in which case interest distributions made aretreated as an expense when calculating corporation tax liability. OEICs and AUTs are deemed to havedistributed all the amounts shown in the distribution account as available for distribution.

15 Please, refer to previous note

46

- DRIs receiving interest distributions from UUTs are taxed at 40% (DRI can reclaimtax withheld at 20%).

- UUTs are exempt from capital gains tax on condition that the investors are all exemptfrom capital gains tax.

Real Estate Investment Trusts (REIT)

Property income and capital gains distributions

- Property income and capital gains distributions by a REIT are made net of 20%WHT.

- Exempt tax payers can apply to HMRC to receive the distribution gross (i.e. no taxbeing withheld).

Residual income distribution

- No WHT apply on dividend distributions made from residual business of the REIT.- High rate tax payers are taxed on dividends paid out from a REIT at 32.5% (with

10% tax credit).- Basic tax payers do not pay any additional tax on dividends distributed from a REIT.

Foreign funds

A foreign fund is required to apply for certification as a distributing fund on an annualbasis. In order to be certified as a distributing fund16, a foreign fund must satisfy thefollowing conditions:

- Distribute at least the higher of 85% of its accounts income and accounts incomeadjusted for UK tax; and

- Determine certain portfolio investment limits in other offshore funds.

Taxation

- Generally cash distributions are taxable on the DRIs when they are actually paid(“cash flow method”).

- In case of reinvestment of units are chosen by the DRI, the distributions are alsotaxable under the UK income tax rules when it is actually credited to DRIs’ account,on the assumption that the distribution can be shown to have passed out of theproperty of the fund and into the property of the DRI, before being reinvested.

- Where investors hold an interest in a non-qualifying fund, cash distributions from thefund, are taxed under UK income tax rules at 32.5% tax rate (dividend distribution).

- Transparent funds

If the fund is transparent for UK tax purposes, the components of underlying income of thefund are taxable in the hands of the investor on an arising basis (i.e. whether distributed ornot). The tax rate will depend on his/ her tax profile.

16 The certification process is currently under review by the UK government and is expected to change inSpring 2009

47

Domestic funds

(English or Scottish Limited Partnerships)

- There is no tax at the fund level

Dividends

- Dividends paid by UK companies to DRIs carry a 10% tax credit.- Higher rate taxpayers are subject to tax at 32.5% (with a 10% tax credit).- Basic rate taxpayers have no further tax to pay and cannot claim a refund for the 10%

credit.- The non-refundable tax credit have been extended to non-UK dividends received on,

or after 6 April 2008, provided the DRI had less than a 10% stake in the non-UKcompany and received less than GBP 5,000 of dividends a year from non-UKresident companies.

Interest income

- DRIs are taxed on interest income depending on their tax profile. The applicable rateis the individuals’ marginal rate of tax of up to 40%.

Capital gains

- Income would be taxed as capital gains on the DRI at a flat rate of 18% as fromApril 2008 (before, taxation at 40% subject to reliefs - many of them have beenabolished in parallel to the dropping of the rate). Changes in partnerships due toadmission of partners would trigger a gain due to changes in profit sharing ratios).

Foreign funds

HMRC has issued guidelines and provided a list of foreign entities which are considered astransparent for UK tax purposes (Tax Bulletin 83).

Foreign Qualifying funds (offshore fund certified as distributing funds)

Dividend income

- Dividend income is taxed at marginal income tax of 32.5%. No 10% tax credit isavailable to DRIs from dividend distributions from foreign funds.

(Note that DRIs do not receive interest income from foreign funds)

Foreign non qualifying funds:

Dividend income

48

The same treatment as to dividend income distributed by a Foreign Qualifying Funds (asdetailed above) applies. However, difference in tax treatment exists upon redemption(please refer to below). Taxation of capital gains upon disposal of its units/ shares by the DRI

Domestic funds and foreign qualifying funds

A new regime applies as from April 6, 2008. Capital gains realised upon disposal of units/shares in domestic funds or in foreign distributing funds are subject to taxation at a flat rateof 18% at the DRI level (many reliefs previously available have been abolished).

Foreign non qualifying funds

If the foreign fund does not qualify for UK distributor status, gains/losses on disposal ofunits/shares receive a less advantageous tax treatment. DRIs are subject to income tax atthe marginal rate of up to 40% (with no relief available). However, where the fund doesnot pay distributions annually, tax deferral may be achieved until the units/share aredisposed. The ultimate tax differential depends on the investors’ tax profile and the natureof income and gains realised as a result of the fund’s investment strategy.

Other taxes

- Stamp duty land tax of 4% would apply on change in partnership interests if thepartnership holds UK real estate.

- Stamp duty would be charged at 0.5% as if it would hold UK shares.- In relation to REITs, stamp duty at a rate of 0.5% may apply upon surrender or

transfer of units/ shares in this vehicle.


- DTT

The application of a DTT needs to be considered on a case-by-case basis, depending on thelegal form of the foreign entity

- Foreign tax relief:

UK investors may be able to claim a UK tax credit for WHT suffered on distributedincome, although the claim for such a credit would be subject to the relevant DTT, andwould be dependent on the type of fund (generally a WHT reclaim is only possible wherethe fund is transparent, e.g. FCPs).

- CFC rules:

CFC rules would not be applicable to individuals.

- Close company rules

There are provisions in UK tax law which could operate to attribute capital gains andincome realised by the fund to investors as they arise in certain circumstances. However

49

this may not be applicable in the case of a widely held retail fund product (refer to tax notein fund prospectus).

Wrappers

Typical investment wrappers available in the UK include Individual Savings Accounts(ISAs), Personal Equity Plans (PEPs)17, insurance policies, and pensions. ISAs would bethe most typical wrappers used by UK investors.

Individuals investing into ISA's pay no tax on any of the income and gains (i.e. dividends,interest, bonuses and capital gains) whereas a direct investment into the underlying funds/vehicles where interest/ dividends/ bonuses earned would be subject to tax.

ISA's limits the amount of funds an individual can invest. Individuals would be able toinvest up to GBP 3,000 in a cash ISA and up to GBP 4,000 in stocks and shares per taxyear.

17 Please note that no new PEPs are offered to investors. PEPs were replaced by ISAs in 1999, however PEPsthat existed in 1999 are still recognised and individuals can transfer PEPs from one provider to another.

50

APPENDIX E: Market Survey

APPENDIX E1: Participants’ profile

Table 35 – Targeted and actual sample population

Populationto be

interviewed

Questionnairesto be collected

Numberof

contactedentities

Numberof

interviews

Number ofquestionnaires

received

Asset managers / wrappermangers

80 80 275 108 80

Distributors 50 50 178 54 50

Transfer agents 10 5 3 0 0

Prime brokers 10 5 0 0 0

Investor and ConsumerAssociations

10 - 14 - 2

Stock Exchanges 9 - 9 9 -

Regulators / supervisors 9 - 9 9 -

Source: PricewaterhouseCoopers Survey

Graph 35 – QM 7: What is your country of domicile?

(Question to fund managers)

N=80


Ireland, 1Italy, 10

Luxembourg,

7

Poland, 3

Spain, 1

Netherlands,

1Switzerland*,

7

UK, 16 France, 26

Germany, 5

Belgium, 3

51

Table 36 – QM 8: Please precise the scope of your answers

(Question to fund managers according to their country of domicile)

N=80

National scale European scale International scale

Belgium 67% 33% 0%

France 42% 58% 0%

Germany 20% 60% 20%

Ireland 100% 0% 0%

Italy 70% 20% 10%

Luxembourg 29% 71% 0%

Poland 100% 0% 0%

Spain 100% 0% 0%

Switzerland 28% 28% 42%

The Netherlands 0% 100% 0%

United Kingdom 31% 44% 25%


Graph 36 – QD 8: What is your country of domicile?

(Question to distributors)

N=50


* When contacting market players in the countries under scope, some of them redirected usto parent companies in Switzerland and in the Netherlands

** ¾ of the distributors located in Luxembourg do not have the Luxembourg nationalityand target other European countries

Belgium, 5

United

Kingdom, 4

Italy, 2

Ireland, 3Switzerland*, 1

Luxembourg**,

19

Germany, 5

France, 11

52

Graph 37 – QD 7: Are you?


N=50


Graph 38 – QD 9: What is the geographical scope of your responses?


N=50


IFA, 11%

Private bank,

26%

Fund platform

/

supermarket,

26%

Insurance

company, 37%

National

scale, 63%

Other, 2%

European

scale, 35%

53

Table 37 – QD 9: What is the geographical scope of your responses?

(Question to distributors according to their country of domicile)

National scale European scale International scale

Belgium 100% 0% 0%

France 82% 18% 0%

Germany 60% 40% 0%

Ireland 100% 0% 0%

Italy 100% 0% 0%

Luxembourg 21% 68% 11%

Switzerland 100% 0% 0%

United Kingdom 100% 0% 0%


Graph 39 – QD 10: What is the total amount of assets under distribution (UCITS andnon-UCITS funds)?


N=37

Total AuM (EUR m)

547,240

565,599

535,000

540,000

545,000

550,000

555,000

560,000

565,000

570,000

2006 2007


54

Graph 40 – QM 11: What kind(s) of non-UCITS funds do you manage?


N=80

FoHF, 30

Guaranteed

funds, 9

FoRE, 4

Other non-

UCITS funds,

13Other

structured

funds, 6

FoPE/VC, 6

Hedge Funds,

20

PE/VC funds,

11

Real estate

funds, 28


As shown above, 28 fund managers in the survey manage real estate funds.

Graph 41 – QD 12: What kind(s) of non-UCITS products do you distribute, sell orrecommand?


N=50


FoRE, 4

FoPE/VC, 7

Guaranteed

funds, 9Other

structured

funds, 7

FoHF, 24

Other non-

UCITS funds,

12

Hedge funds, 9

PE/VC, 10

Real estate

funds, 18

55

Table 38 – Distributors surveyed offering non-UCITS funds by domicile

N RE HF PE/VCGuaranteed

funds

Otherstructured

funds

Othernon-

UCITSfunds

FoHF FoPE/VC FoRE

Belgium 5 40% 20% 20% 40% 20% 20% 40% 20% 0%

France 11 45% 9% 27% 0% 18% 9% 64% 18% 9%

Germany 5 60% 20% 0% 40% 0% 0% 40% 0% 0%

Ireland 3 33% 0% 33% 0% 0% 33% 0% 0% 0%

Italy 2 0% 0% 0% 0% 0% 0% 50% 50% 0%

Luxembourg 19 26% 32% 26% 21% 21% 32% 53% 16% 11%

Switzerland 1 0% 0% 0% 0% 0% 100% 100% 0% 0%

UK 4 50% 0% 0% 25% 0% 50% 25% 0% 25%

Total 50 36% 18% 20% 18% 14% 24% 48% 14% 8%


Table 39 – Fund Managers surveyed offering non-UCITS funds by domicile

N RE HF PE/VCGuaranteed

funds

Otherstructured

funds

Othernon-

UCITSfunds

FoHF FoPE/VC FoRE

Belgium 3 0% 33% 0% 100% 0% 67% 33% 0% 0%

France 26 35% 23% 12% 8% 12% 0% 42% 4% 0%

Germany 5 80% 20% 0% 20% 0% 20% 20% 0% 40%

Ireland 1 0% 0% 0% 0% 0% 100% 0% 0% 0%

Italy 10 20% 30% 20% 0% 10% 10% 80% 0% 0%

Luxembourg 7 14% 29% 14% 0% 0% 43% 14% 14% 14%

Poland 3 0% 33% 0% 33% 0% 67% 0% 0% 0%

Spain 1 100% 0% 0% 0% 0% 0% 0% 0% 0%

UK 16 50% 19% 19% 0% 0% 13% 6% 13% 6%

Switzerland 7 43% 43% 29% 14% 29% 0% 71% 29% 0%

Netherlands 1 0% 0% 0% 100% 0% 100% 100% 0% 0%

Total 80 35% 25% 14% 11% 8% 16% 36% 8% 5%


56

APPENDIX E2: Investor base split

Graph 42 – QM20: Are your non-UCITS funds accessible to individual investors (HNWI,Mass affluent or retail investors)?(Question to fund managers with AuM > EUR 5 bn)N=36


Graph 43 – QM20: Are your non-UCITS funds accessible to individual investors (HNWI,Mass affluent or retail investors)?(Question to fund managers with AuM < EUR 5 bn)N=39


100% 100% 100% 100%

79% 80% 83%

50%

21% 20% 17%

50%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Guaranteed

funds

Other

structured

funds

Other non-

UCITS

funds

FoRE FoPE Real estate

funds

FoHF Hedge

Funds

PE/VC

funds

No

Yes

100% 100% 100%

80% 75%57% 57%

20% 25%43% 43%

93%

7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Guaranteed

funds

Other

structured

funds

FoPE FoHF Other non-

UCITS funds

Hedge

Funds

Real Esate

Funds

PE/VC funds

No

Yes

57

Graph 44 – QM 21-22: What was the final investor base split by non-UCITS funds net sales in2006 and 2007?(Question to fund managers with AuM > EUR 5 bn)N=35

13% 15%

3%

4%

3%

4% 5%

8% 9%

5%6%

8%5%

5%

5%4%

5%

13%14%

5%

9%

62%73%

7%3%

64%65%

86%86%

52%64%59%

51%

4%

2% 2%

7%7%

3% 2%

57%62%

2%

24%20%20%

12%

13%

2%

1% 1%

17%

6% 8%7%5%

88%87%

42% 43%

22%14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

RE

2006

RE

2007

HF

2006

HF

2007

PE/V

Cfu

nds

2006

Pe/VC

fund

s20

07

FoF20

06

FoF20

07

Gua

rant

eed

funds

2006

Gua

rant

eed

funds

2007

Oth

erstru

ctur

ed20

06

Oth

erstru

ctur

ed20

07

Oth

erNon

-UCIT

S20

06

Oth

erNon

-UCIT

S20

07

Institutional investing for their own account HNWI Mass Affluent Retail Ask my Intermediary


Graph 45 – QM 21-22: What was the final investor base split by non-UCITS funds net sales in2006 and 2007?(Question to fund managers with AuM < EUR 5 bn)N=36

3%14%

19%

9% 9%

5%

34%

44%53%

47%

60%

100%100%

7%10%

67%68%

24%

61% 63%63%

16%

32% 32%19%18%

25%

3%

18%

25%

25%33%

18% 26%

5%11%

24%

90% 93%

11%4%2% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

RE

2006

RE

2007

HF

2006

HF

2007

PE/V

Cfu

nds

2006

PE7V

Cfu

nds20

07

FoF20

06

FoF20

07

Gua

rant

eed

funds

2006

Gua

rant

eed

funds

2007

Oth

erstru

ctur

ed20

06

Oth

erstru

ctur

ed20

07

Oth

erNon

-UCIT

S20

06

Oth

erNon

-UCIT

S20

07

Institutional investing for their own account HNWI Mass Affluent Retail Ask my Intermediary


58

Graph 46 – QM 21-22: What was the final investor base split by non-UCITS funds net sales in2006 and 2007?(Question to real estate fund managers)N=21

56%

46%

81%76%

7%6%

6%9%

15%14%

4% 6%20%

9%

38%

26%

58% 57%

4%

4%12%

24%

9%

13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Franc

e200

6

Franc

e200

7

UK

2006

UK

2007

Oth

er20

06

Oth

er20

07

Institutional investors investing for their own account HNWI Mass Affluent Retail Ask my intermediary


59

Graph 47 – QM 14-15: In your opinion, what is the percentage of your non- UCITS AuM thatare directly and indirectly (in a wrapper format) held by retail investors at the end of 2006and 2007?(Question to fund managers with AuM > EUR 5 bn)N=33

8.3%

9.7%

19.4%

19.2%

14.5%

21.6%

39.1%

37.5%

19.4%

16.7%

0.0%

0.4%

6.7%

8.4%

0.0%

0.0%

5.3%

4.7%

0.3%

0.3%

0.0%

3.4%

0.0%

0.0%

0% 10% 20% 30% 40% 50% 60% 70%

PE/VC 2006

PE/VC 2007

Hedge funds 2006

Hedge funds 2007

Other structured funds 2006


Real estate funds 2006


Funds of funds 2006

Funds of funds 2007

Other non-UCITS funds 2006


Guaranteed funds 2006


Direct

Indirect


60

Graph 48 – QM 14-15: In your opinion, what is the percentage of your non- Ucits AuM thatare directly and indirectly (in a wrapper format) held by retail investors at the end of 2006and 2007?(Question to fund managers with AuM < EUR 5 bn)N=28


10.8%

8.9%

13.2%

12.8%

15.0%

14.2%

63.7%

38.0%

8.6%

10.4%

46.8%

0.0%

0.2%

4.2%

4.5%

0.2%

0.0%

1.3%

1.0%

4.6%

4.9%

3.5%

0.0%

0.0%

0.0%

0.4%

0.1%

0.0%

0% 20% 40% 60% 80% 100%



Funds of funds 2006

Funds of funds 2007

PE/VC 2006

PE/VC 2007



Hedge funds 2006

Hedge funds 2007





Direct

Indirect

61

Graph 49 – QM 20: Are your non-UCITS funds accessible to individual investors (HNWI,Mass affluent or retail investors)?(Question to fund managers from France)N=23


Graph 50 – QM 21-22: What was the final investor base split by non-UCITS funds net sales in2006 and 2007?(Question to fund of fund managers)N = 31


91% 89% 83%

17%11%9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FoHF Real estate funds Hedge Funds

No

Yes

73%

15%

71% 69%

20% 20%

8% 9%

4% 5%

17%

72%

16%

21%24%

2%2%

26%24%

2%

38%

2%17%

36%

4% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Franc

e200

6

Franc

e200

7

Italy

2006

Italy

2007

Oth

er20

06

Oth

er20

07

Institutional investing for their own account HNWI Mass Affluent Retail Ask my intermediary

62

APPENDIX E3: Distribution channel

Graph 50 bis – QM 26-27: What was your distribution channel mix to reach individualinvestors in 2006 and 2007?(Question to fund managers from France)N= 18


20% 19%

8% 8%1% 1%

32% 43% 41%

44%12% 6%

1%1%

13%13% 14%

18%28%

29%

3% 3%3%

12% 13%

22%

24%

19% 22%

9%4%

37%

16%

41%5%

2%

2%

1%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

HNWI 2006 HNWI 2007 Mass Affluent 2006 Mass Affluent 2007 Retail 2006 Retail 2007

Direct distribution Stock exchange retail bank

Private bank Investment bank Insurance companies

Fund platform/supermarkets IFAs Fund of fund managers

63

Graph 51 – QM 26-27: What was your distribution channel mix to reach individual investorsin 2006 and 2007?(Question to fund managers from Italy)N=7


Graph 52 – QM 26-27: What was your distribution channel mix to reach individual investorsin 2006 and 2007?(Question to fund managers from the UK)N=9


19% 19%

14%

64%

3%

17%

7%

57%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

HNWI/mass aff 2006 HNWI/mass aff 2007

Fund of fund managers

IFAs

Fund platform/supermarkets

Insurance companies

Investment bank

Private bank

retail bank

Stock exchange

Direct distribution

19% 18%13% 13%

11% 10%

19%

27% 25%

26%

15%

2%

4%

21% 23%

27% 27%

31% 37%28%

3%

18%19%

21%

18%

26%2%

32%37%

28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

HNWI 2006 HNWI 2007 Mass Affluent

2006

Mass Affluent

2007

Retail 2006 Retail 2007




64

Graph 53 – QM 26-27: What was your distribution channel mix to reach individual investorsin 2006 and 2007?(Question to fund managers with AuM > EUR 5 bn)N=25


Graph 54 – QM 26-27: What was your distribution channel mix to reach individual investorsin 2006 and 2007?(Question to fund managers with AuM < EUR 5 bn)N=26


16% 16%7% 7% 6% 6%

6% 6%

9% 9% 27%

46%52%

39% 25%

3%

6% 6%

5% 4%

10% 10%16% 15%

25%22%

6% 6% 9% 8%

8% 7%1% 1%

4% 5%

6% 5%13% 13%

9%

23%

27%39%

2%

9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


2006

Mass Affluent

2007





21% 21% 18% 18%13% 13%

11% 10%

19%

27% 25%

56%15%

2%

1%

4%

21% 23%

19%20% 32%

31% 37% 37%

4% 6% 3%

21%

18%

51%

2%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


2006

Mass Affluent

2007





65

Graph 55 – QM 37: What are the sales volumes of your non-UCITS funds that have beenoffered directly to individual investors through private placements and through publicofferings? (in EUR million)(Question to fund managers)N=10

7

71

14

120

10

20

30

40

50

60

70

80

90

HWNI Mass affluent Retail investors

Private Placement

Public Offering


66

European Life Insurance Market

The table below gives an overview of the premium delivered on life insurance contract by country.

Table 40 – Unit-linked premium in European countries (in EUR million)

CountryLife

premium

Share invested

in unit-linked

Premium

income of unit-

linked products

United Kingdom 196,346 25.2% 49,567

France 140,203 24.7% 34,671

Italy 69,377 39.5% 27,381

Luxembourg 11,610 84.6% 9,826

Germany 74,714 12.1% 9,048

Sweden 12,661 44.5% 5,640

Belgium 20,488 20.0% 4,091

Portugal 8,521 41.7% 3,553

Spain 22,472 15.1% 3,399

Poland 5,400 46.1% 2,491

Denmark 12,471 18.1% 2,253

Finland 3,058 52.3% 1,600

Hungary 1,592 58.9% 938

Greece 2,311 34.0% 786

Czech Republic 1,663 23.8% 397

Slovenia 542 52.0% 282

Cyprus 294 72.8% 214

Malta 171 29.4% 50

Estonia 84 57.1% 48

Austria 7,183

Ireland 12,327

Latvia 23

Lithuania 131

Slovakia 685

The Netherlands 25,800

in which EU (25) 630,127 40.4% 156,232

Country of the scope 552,937 33.4% 140,472

Source: CEA

It is worth noting that the premium income on unit-linked for the countries of our scope account for90% of the premium income on unit-linked in the EU (25):

United Kingdom and France account for 60% of the premium income on unit-linked products forthe country of our scope. Whereas all kind of non-UCITS products are eligible in a life insurancecontract in France, the scope of product is limited to real estate funds in the UK as investment innon-UCITS funds is possible in a list of specific assets, provided that these assets are “capable ofbeing realised in time for the insurance company to meet its obligations to linked policyholders”18.

18 FSA -New Conduct of Business Sourcebook, COBS 21

67

Graph 56 – QM 21-22: What was the final investor base split by non-UCITS funds net sales in2006 and 2007?(Question to fund of HF managers)

N=24

67%

35%15%

2%

7%

59%

10%

1%4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006

2007

Unknown final investor

Retail

Mass Affluent

HNWI

Institutional investing for their own account


68

APPENDIX E4: Market dynamics

Graph 57 – QD 46: Is the retailisation of non-UCITS funds a real trend and if so, is itprimarily driven by the demand or the supply side?(Question to distributors)N=37


7%

29%

13%

0%

17%11%

40%

10%

60%

42%

25%

60%

66%

42%

27%

40%

33%29%

62%

40%

17%

47%

33%

50%

0%

20%

40%

60%

80%

100%

Real estate

funds

Hedge funds PE/VC funds Guaranteed

funds

Other

structured

funds

FoHF Other FoF Other non-

UCITS funds

No retailisation trend

Yes, driven by the demand

Yes, driven by the supply

69

Graph 58 – QM 62: Is the retailisation of non-UCITS funds a real trend and if so, is itprimarily driven by the demand or the supply side?(Question to fund managers)

N=66


Graph 59 – QM62 and QD46: Is the retailisation of non-UCITS funds a real trend and if so, isit primarily driven by the demand or the supply side?(Question to fund managers and distributors with AuM < EUR 5 bn)

N= 66


8%

25% 22%

11%

60%

23% 23%

60%31%

44%

78%

20%

30%38%

32%

44%

34%

11%20%

47%39%

0%

20%

40%

60%

80%

100%

Real Estate

funds


funds

Other

structured

funds

Funds of funds Other non-

UCITS funds

No retailisation trend

Yes, driven by the demand

Yes, driven by the supply

5%

33%

17% 14%

30%

9%

62%

50%

50%80%

43%

33%

36%

33%

17%

33%

20%

43%37%

55%

0%

20%

40%

60%

80%

100%

Real Estate

funds


funds

Other

structured

funds


UCITS funds

Yes, driven by the supply Yes, driven by the demand No retailisation trend

70

Graph 60 – QM62 and QD46: Is the retailisation of non-UCITS funds a real trend and if so, isit primarily driven by the demand or the supply side?(Question to fund managers and distributors with AuM > EUR 5 bn)

N= 47


10%18% 20%

11%

50%

10%

25%

58%

18%

67%

33%

33%

42%

32%

64%

80%

22%17%

57%

33%

0%

20%

40%

60%

80%

100%

Real Estate

funds


funds

Other

structured

funds


UCITS funds

Yes, driven by the supply Yes, driven by the demand No retailisation trend

71

Graph 61 – QM 63: Is the distribution of non-UCITS funds to retail investors one of yourstrategic objectives?(Question to fund managers)

N=72


41%

89%

33%39%

62%

59%

72%80%

11%

67%61%

38%

20%28%

0%

20%

40%

60%

80%

100%

Real Estate

funds

Hedge funds Private

Equity /

Venture

capital funds

Guaranteed

funds

Other

structured

funds

Funds of

funds

Other non-

UCITS funds

NO

YES

72

Graph 62 – QD 47: Is the distribution of non-UCITS funds to retail investors one of yourstrategic objectives?(Question to distributors)

N=32


Graph 63 – QM 63 & QD 47: Is the distribution of non-UCITS funds to retail investors one ofyour strategic objectives?(Question to fund managers and distributors with AuM < EUR 5 bn)

N= 55


73%

33%

50%

77%

67%

27% 27%

7%

67%

50%

23%

33%

73%

93%

0%

20%

40%

60%

80%

100%

Real Estate

funds


funds

Other

structured

funds


UCITS funds

YES

NO

31%

40%

50%

15%

35%

22%

69%

100% 100%

60%

50%

85%

65%

78%

0%

20%

40%

60%

80%

100%

Real estate

funds


funds

Other

structured

funds

Funds of

hedge funds

Other FoF Other non-

UCITS funds

No

Yes

73

Graph 64 – QM 63 & QD 47: Is the distribution of non-UCITS funds to retail investors one ofyour strategic objectives?

(Question to fund managers and distributors with AUM > EUR 5 bn)

N=49


Graph 65 – QM 65: If you do not currently offer non-UCITS funds to retail investors, wouldyou plan to do so in the future?


N= 50


50%

25%

67% 64%

40%

50%

14%20%

75%

33% 36%

60%

80%86%

0%

20%

40%

60%

80%

100%

Real Estate

funds


funds

Other

structured

funds

Funds of

funds

Other non-

UCITS funds

YES

NO

12%7%

59%

68%

86% 76%71%

60%

68% 84%

64%

19%24%

9% 12%17% 17% 19%

11%

29%

22%

8% 5%12%

23%13%

5%0%

25%

50%

75%

100%

Real Estate

funds

Hedge

funds

PE/VC

funds

Guaranteed

funds

Other

structured

funds

Funds of

hedge

funds

Funds of

real estate

funds

Funds of

private

equity

funds

Other non-

UCITS

funds

No opinion

NO

YES

74

Graph 66 – QD 49: If you do not currently offer non-UCITS funds to retail investors, wouldyou plan to do so in the future?


N= 26


Graph 67 – QM 82: Would a harmonised regulatory framework for the retail distribution ofnon-UCITS products be needed?

(Question to fund manager)

N= 69


62%

55%

73%

10% 9% 9%

28%36%

18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

About risk About performance About costs

Do not know

No

Yes

72% 69%

45%49%

67%

56%64%

0%

4%5%

33%

13%

16%

13%

0%

26%22%

38%

17%

31%36%

0%

24%

0%

25%

50%

75%

100%

R eal esta te

funds

H edge F unds P E/ VC funds Guaranteed

funds

Other

structured

funds

F unds o f

funds

Other no n-

UC IT S funds

No opinion

No

Yes

75

Graph 68 – QD 66: Would a harmonised regulatory framework for the retail distribution ofnon-UCITS products be needed?


N= 32


Graph 69 – QM 82 & QD 66: Would a harmonised regulatory framework for the retaildistribution of non-UCITS products be needed?

(Question to fund managers and distributors by asset size)

N= 101


33%

17%

43%

28% 25% 25%32%

50%

38%

67%

25%

33%

28%

43% 50%

31%

33%

25% 49%0%

42%50%

29% 29% 25%

44%

33%25%

13%

33%

0%

25%

50%

75%

100%

Real estate Hedge

funds

PE/VC

funds

Guaranteed

funds

Other

structured

funds

FoHF FoRE FoPE/VC Other non-

UCITS

funds

Do not

distribute

No opinion

No

Yes

56%51%

22% 34%

15%22%

0%

25%

50%

75%

100%

< 5 EUR bn > 5 EUR bn

Do not know

No

Yes

76

APPENDIX F: Questionnaire for fund managers

Retailisation of non-harmonised investment fundsin the European Union

The following questionnaire is dedicatedto fund managers, multi-managers and promoters

Deadline for submission: May 31, 2008

Thank you for your time.Your opinion counts.

77

Retailisation of non-UCITS funds in the EU (Fund Managers)

Presentation of the study - Useful information to fill in the questionnaire

Further to the European Commission’s tender offer N°MARKT/2007/13/G, PricewaterhouseCoopersLuxembourg has been issued with the conduction of the first study on the retailisation of non-harmonised investment funds ("non-UCITS funds") in the European Union.

The target of the study is threefold: identify the non-UCITS products sold to retail investors, analyse thedistribution channels of those products and finally highlight the current drivers and barriers shaping thisinvestment sector as well as the development perspectives.

Each participant will be asked to provide information on their distribution model of non-UCITS funds.The survey will investigate five potential scenarios:

1) Some of your non-UCITS funds are listed on a stock exchange

and/or

2) You sell non-UCITS funds by yourself i.e. without any intermediary and not in a wrapper format

and/or

3) You sell non-UCITS by yourself (without intermediary) but in a wrapper format (e.g. managed accounts)

and/or

4) Your non-UCITS funds are sold via (pure) distributors/intermediaries (e.g. funds platforms…)

and/or

5) Your non-UCITS funds are sold via (wrapper) distributors/intermediaries that market your funds inwrappers (e.g. certificates, FoHF, life insurances)

For the purpose of the study, we will define:

- Wrappers as “packaged” product or service that enables customers to shelter various kinds of investmentsfrom capital gains tax or income tax payments. Wrappers will be considered as means of distribution of non-UCITS funds.

- High Net Worth Individuals (HNWI) as individuals with more than EUR1 million of liquid assets;

- Mass Affluent as individuals with EUR100,000 to EUR1 million of liquid assets;

- Retail investors as individuals with liquid assets of less than EUR100,000 and fund subscription lowerthan EUR10,000;

- Individual investors will consist of HNWI, mass affluent and retail investors.

Confidentiality

PricewaterhouseCoopers is one of the world’s largest professional services organisations, and integrity andconfidentiality are paramount to our business. At any time, we deal with a significant number of highly confidentialmatters and this survey is no different. All your answers to this survey are private and confidential. All data you providewill be anonymous for the purposes of processing and analysis.

78

BACKGROUND INFORMATION

*1. What is the name of your company?

2. Who is your parent company?

3. What is your name?

4. What is your job title?

*5. What is your e-mail address?

6. What is your phone number?

*7. What is your country of domicile?

Belgium France Germany

Ireland Italy Luxembourg

Poland Spain United Kingdom

Other, please specify....................

79

8. Please precise the scope of your answers:

European scale

National scale

Other, please specify............................................................

9. What is the total amount of your assets under management (UCITS and non-UCITS funds)?

2006 (in EURm) 2007 (in EURm)2008 estimates (in

EURm)

Total AuM (UCITS andnon-UCITS)

10. What are your total sales volumes (UCITS and non-UCITS funds)?

2006 (in EURm) 2007 (in EURm)2008 estimates (in

EURm)

Total Sales volume(UCITS and non-UCITS)

*11. What kind of non-UCITS funds do you manage?

Real estate funds Hedge Funds

Private Equity / Venture capital funds Guaranteed funds

Other structured funds Funds of funds

Other non-UCITS funds I do not manage or offer non-UCITSproducts

IF YOU DO NOT MANAGE OR OFFER NON-UCITS FUNDS: thank you for your interest in this survey.Unfortunately, we were looking for non-UCITS market players and you do not qualify to complete the rest ofthe survey.

Please return the questionnaire to us by email ([email protected]) or by fax (+352 49 48 48 2909)

80

12. If "other non-UCITS funds", please specify

13. If "funds of funds", please indicate in which non-UCITS funds they are invested:

Funds of funds

Real estate funds

Hedge Funds

Private Equity / Venture capital funds

Guaranteed funds

Other structured funds


81

*14. In your opinion, what is the percentage of your non-UCITS AuM that are directly and indirectly* (in awrapper format) held by retail investors at the end of 2007?

*Wrappers products and services may grant investors access to non-UCITS funds (through life insurances, tax wrappers,discretionary/managed accounts...) Therefore, wrappers will be considered as potential means of distribution for the purposeof our survey.

**Retail investors are defined as individuals with liquid assets of less than EUR100,000 and fund subscription lower thanEUR10,000;

% of non-UCITS AuM directly held byretail

% of non-UCITS AuM indirectly held byretail (trhrough wrappers)

Real estate funds

Hedge Funds

Private Equity / Venturecapital funds

Guaranteed funds


Funds of funds

Other non-UCITS funds

*15. In your opinion, what was the percentage of your non-UCITS AuM that were directly and indirectly*(in a wrapper format) held by retail investors at the end of 2006?

% directly held % indirectly held (through wrappers)

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


82

Belgium France Germany Ireland Italy Luxembourg Poland Spain UK OtherEuropeancountries

Luxembourg domiciled funds

France domiciled funds

Germany domiciled funds

Italy domiciled funds

Ireland domiciled funds

UK domiciled funds

Spain domiciled funds

Belgium domiciled funds

Poland domiciled funds

Other EU domiciled countries

Offshore domiciliation countries, pleasespecify

............................................................

16. What are the countries notified for the sale of your non-UCITS funds, according to their domiciliation country?

83

17. How many non-UCITS funds do you manage?

Expectations for 2008

2006 20071

Increase2

Decrease3

Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


18. What is the size of your non-UCITS assets under management?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


84

19. What are the sales volumes of your non-UCITS funds in Europe?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


*20. Are your non-UCITS funds accessible to individual investors (HNWI, Mass affluent or retailinvestors)?

Yes

No

IF YOUR ANSWER IS “NO”, PLEASE GO DIRECTLY TO PAGE 16

85

*21. What was the final investor base split of your non-UCITS funds sales in Europe in 2007? (in % ofyour non-UCITS sales)?

Please make sure the sum of each rows equals 100%.

* "Ask my intermediaries" refers to the share of your non-UCITS funds that is sold via intermediaries /distributors and for which you do not know the final investor base split.

Institutionalinvesting for

their ownaccount

HNWIMass

affluentRetail

Ask myintermediaries*

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


86

*22. What was the final investor base split of your non-UCITS funds sales in Europe in 2006?

(in % of your non-UCITS sales)?


* "Ask my intermediaries" refers to the share of your non-UCITS funds that is sold via intermediaries /distributors and for which you do not know the final investor base split.

Institutionalinvesting for

their ownaccount

HNWIMass

affluentRetail

Ask myintermediaries*

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


23. How do you expect your retail share in your investor base to evolve in 2008?

Increase Decrease Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


87

24. What was the breakdown by country of your non-UCITS sales to retail investors in 2007? (% of annual non-UCITS sales to retail investors)


Belgium France Germany Ireland Italy Luxembourg Poland Spain UKOther

Europeancountries

OutsideEurope

No retaildistribution

Real estatefunds

HedgeFunds

PrivateEquity /Venturecapitalfunds

Guaranteedfunds

Otherstructuredfunds

Funds offunds

Other non-UCITSfunds

88

25. What was the breakdown by country of your non-UCITS sales to retail investors in 2006? (% of annual non-UCITS sales to retail investors)

Please make sure the sum of each row equals 100%.


Europeancountries

OutsideEurope


Real estatefunds

HedgeFunds

PrivateEquity /Venturecapitalfunds

Guaranteedfunds


Funds offunds


89

26. What was your distribution channel mix to reach individual investors in 2007? (in % of non-UCITS sales)


Directdistribution

StockExchange

Retailbank

Privatebank

Investmentbank

Insurancecompanies

Fundplatforms /

supermarketsIFAs

Fund offunds

managers

HNWI

Massaffluent

Retail

27. What was your distribution channel mix to reach individual investors in 2006? (in % of non-UCITS sales)


Directdistribution

StockExchange

Retailbank

Privatebank

Investmentbank

Insurancecompanies

Fundplatforms /

supermarketsIFAs

Fund offunds

managers

HNWI

Massaffluent

Retail

*28. What is (are) your most used retail distribution model(s) according to the following scenarios?

Scenario 1: Your non-UCITS funds are listed on a stock exchange

Scenario 2: You are in contact with retail clients and you sell them your non-UCITS funds i.e.without any intermediary

Scenario 3: You are in contact with retail clients and you sell them your non-UCITS funds but ina wrapper format

Scenario 4: You sell your non-UCITS funds to retail clients via pure intermediaries i.e. that donot distribute your funds through wrappers

Scenario 5: You sell your non-UCITS funds to retail clients via wrapper intermediaries i.e. thatdistribute your funds through wrappers

Other, please specify...........................................................

Retail investors do not have access to your non-UCITS funds

90

29. Please specify the advantages and disadvantages of your most used distribution models:

91

Five scenarios will now be considered:

Scenario 1: Your non-UCITS funds are listed on a stock exchange

Scenario 2: You sell your non-UCITS funds on your own (without any intermediary)and not in a wrapper format

Scenario 3: You sell your non-UCITS funds on your own (without any intermediary)but in a wrapper format

Scenario 4: You sell your non-UCITS funds via "pure" intermediaries (i.e. your fundsare nor re-packaged into wrappers)

Scenario 5: You sell your non-UCITS funds via "wrapper intermediaries" (i.e. yourfunds are marketed in wrappers)

Each participant will be asked if the above mentioned scenarios apply to hisdistribution model.

92

Scenario 1:

Your non-UCITS funds are listed on a stock exchange.

Individual investors may have access to listed non-UCITS funds.

*30. Are your non-UCITS funds listed?

Yes

No

IF YOUR ANSWER IS “NO”, PLEASE GO DIRECTLY TO SCENARIO 2 (PAGE 20)

31. How many of your non-UCITS funds are listed on a European stock exchange?

2006 2007

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


93

32. What is the size of your listed non-UCITS assets under management?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


94

33. What are the sales volumes of your listed non-UCITS funds?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


34. Where are your funds listed?

Euronext Eurex

London Stock Exchange Irish Stock Exchange

Luxembourg Stock Exchange Borsa Italiana

Warsaw Stock Exchange BME Spanish Exchange

Other, please specify..............................

95

Scenario 2:

You sell your non-UCITS funds to individual investors on your own (without anyintermediary and not in a wrapper format)

Fund managers may be in contact with individual investors and sell non-UCITSfunds to them (not through wrappers such as discretionary / managed accounts,

life-insurance contracts or other personal tax wrappers)

*35. Do you distribute some of your non-UCITS funds directly (without any intermediary) and not in awrapper format to individual investors (HNWI, Mass affluent or retail investors)?

Yes

No


96

36. What are the sales volumes of your non-UCITS funds that have been offered directly to individualinvestors through private placements?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

HNWI

Mass affluent

Retail investors

37. What are the sales volumes of your non-UCITS funds that have been offered directly to individualinvestors through public offerings?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

HNWI

Mass affluent

Retail investors

38. Regarding the proportion of your non-UCITS direct sales to retail investors, how has it evolvedduring the last 3 years? How do you think it will evolve over the next 3 years?

Considerableincrease

Moderateincrease

Stable Moderatedecrease

Considerabledecrease

Over the last 3 years

Over the next 3 years

97

39. What is the percentage of your non-UCITS direct sales to retail investors that are cross-border*?

* Cross-border sales are defined here as sales taking place outside the fund domiciliation country.


2006 (%) 2007 (%)1

Increase2

Decrease3

Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


Scenario 3:

You sell your non-UCITS funds to individual investors on your own (without anyintermediary)but in a wrapper format.

You may market your non-UCITS funds in wrapper products (e.g. discetionary /managed accounts, tax wrappers or certificates...) and subsequently sell them to

individual investors.

98

*40. Do your teams market your non-UCITS funds in wrappers (e.g. discretionary/managed accounts, taxwrappers, certificates...) to be offered to individual clients (HNWI, mass affluent or retail investors)?

Yes

No


*41. What type(s) of wrappers do you offer?

Discretionary / Managed accounts Pension products

Life Insurance contracts Certificates / structured products

Other personal tax wrappers If other personal tax wrappers, pleasespecify

..............................

42. What is the size of your non-UCITS funds that you have sold to individual clients through wrappers?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

HNWI

Mass affluent

Retail investors

99

43. What was the breakdown of your non-UCITS funds sales to individuals by wrappers in 2007?

(in EURm)

Realestatefunds

Hedgefunds

Privateequity /Venturecapitalfunds

Guaranteedfunds

Otherstructured

funds

Funds offunds

Othernon-

UCITSfunds

Discretionary /Managed accounts

Pension products

Life Insurancecontracts

Certificates /structured products

Other personal taxwrappers

44. What was the breakdown of your non-UCITS funds sales to individuals by wrappers in 2006?

(in EURm)

Realestatefunds

Hedgefunds

Privateequity /Venturecapitalfunds

Guaranteedfunds

Otherstructured

funds

Funds offunds

Othernon-

UCITSfunds

Discretionary /Managed accounts

Pension products

Life Insurancecontracts

Certificates /structured products


100

45. Regarding the proportion of your non-UCITS funds you sold to retail investors through wrappers,how has it evolved during the last 3 years? How do you think it will evolve over the next 3 years?


Moderateincrease





46. What was the percentage of your non-UCITS sales to individuals through wrappers that are cross-border?

* Cross border sales are defined here as sales taking place outside the fund domiciliation country.


2006 (%) 2007 (%)1

Increase2

Decrease3

Neutral

Discretionary / Managedaccounts

Pension products

Life Insurance contracts

Certificates / structuredproducts


101

Scenario 4:

You sell your non-UCITS funds via pure intermediaries (i.e. that do not re-packageyour funds into wrappers)

Non-UCITS funds may be distributed to individual investors via pure intermediariesi.e. intermediaries that do not package your non-UCITS funds into wrapper products

such as insurance life contracts, discretionary/managed accounts, pensionproducts, certificates or other tax personnal wrappers.

*47. Do you use pure intermediaries to distribute your non-UCITS funds to individual clients (HNWI, Massaffluent, retail investors)?

Yes

No

IF YOUR ANSWER IS “NO”, PLASE GO DIRECTLY TO SCENARIO 5 (QUESTION 53 PAGE 29)

48. What are the sales volumes of your non-UCITS funds that you have distributed via a pureintermediary?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


102

*49. Do you know the final investor base split of your non-UCITS funds that are distributed via your"pure" intermediaries?

Yes

No

IF YOUR ANSWER IS “NO”, PLEASE GO DIRECTLY TO PAGE 28 (question 53)

50. What was the investor base split of your non-UCITS funds that are sold via pure intermediaries in2007?(in % of non-UCITS sales).


Institutionalclients

HNWI Mass affluent Retail

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


103

51. What was the investor base split of your non-UCITS funds that are sold via pure intermediaries in2006?(in % of non-UCITS sales).


Institutionalclients

HNWI Mass affluent Retail

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


52. Regarding the proportion of your non-UCITS sales to retail investors via pure intermediaries, howhas it evolved during the last 3 years? How do you think it will evolve over the next 3 years?


Moderateincrease





104

53. Could you please indicate the contact information (company name, contact name, phone number,email...) of all of your pure intermediaries?

For the purpose of the study, we shall reserve the right to contact your intermediaries to get a complete aspossible picture of your distribution chain.

105

Scenario 5:

You sell your non-UCITS funds via wrapper intermediaries

We are referring here to intermediaries that package your non-UCITS funds intowrapper products to be marketed to individual investors (e.g. fund of funds

managers may offer your non-UCITS funds to individual investors through funds offunds; private banks through discretionary or managed accounts; investment banksthrough structured notes; insurance companies through life insurance contracts...)

*54. Do you sell your non-UCITS funds to intermediaries that may subsequently package them intowrappers to be marketed to individual investors (HNWI, Mass affluent or retail investors)?

Yes

No

Do not know, if funds are subsequently re-packaged into wrappers to be offered to individuals

IF YOUR ANSWER IS “NO”, GO DIRECTLY TO PAGE 33

IF YOUR ANSWER IS “DO NOT KNOW IF…” PLEASE GO TO PAGE 32 (question 61)

*55. What kind of players are those wrapper intermediaries who buy your non-UCITS funds?

Retail banks Private banks

Investment banks Fund platforms / supermarkets

Insurance companies Fund of funds managers

IFAs Other, please specify..............................

106

56. What are the sales volumes of your non-UCITS funds sold to wrapper intermediaries who maymarket your funds in wrapper products to individuals?


2006 (EURm) 2007 (EURm)1

Increase2

Decrease3

Neutral

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


57. In what kind of wrappers are your non-UCITS funds re-packaged by your wrapper intermediaries?

Fundsof

funds

Personnaltax

wrappers

Pensionproducts

Discretionary/ Managedaccounts

Certificates Insurancecontracts

Donot

know

Real estate funds

Hedge Funds

Private Equity /Venture capital funds

Guaranteed funds


Funds of funds


107

*58. Do you know the investor base split of your non-UCITS funds that are distributed via wrapperintermediaries?

Yes

No

IF YOUR ANSWER IS “NO”, PLEASE GO DIRECTLY TO PAGE 32 (question 61)

59. What was the investor base split of your non-UCITS sales that are sold via wrapper intermediaries ina wrapper format at the end of 2007?

(in % of sales)


Institutional clients Mass affluent Retail

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


60. Regarding the proportion of your non-UCITS funds that are re-packaged by wrapper intermediariesand sold to retail investors, how has it evolved during the last 3 years? How do you think it will evolveover the next 3 years?


Moderateincrease





108

61. Could you please indicate the contact information (company name, contact name, phone number,email...) of your wrapper intermediaries?

For the purpose of the present study, we shall reserve the right to contact your intermediaries to get a completepattern of your distribution chain.

109

Market dynamics: trends and barriers

62. In your opinion, is the retailisation of non-UCITS funds a real trend and if so, is it primarily driven bythe demand or by the supply side?

No retailisationtrend

Supply driven Demand drivenComments

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


110

63. Is the distribution of your non-UCITS funds to retail investors a strategic objective?

YES NOWhy? N/A

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


64. Are some of your non-UCITS specifically targeting individual investors?

If yes, could you please provide us with the names of these funds?

HNWI Mass affluent Retail investorsFund names

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


111

65. If you do not currently offer non-UCITS funds to retail investors, would you plan to do so in thefuture?

YES NO DO NOT KNOWComments

Real estate funds

Hedge Funds


Guaranteed funds


Funds of hedge funds

Funds of real estatefunds

Funds of private equityfunds


66. Which client categorisation do you use to segment your client base?

MiFID (retail client, professional client, eligible counterparty)

Prospectus Directive (qualified, unqualified investors)


112

67. How would you assess the impact of the retailisation of non-UCITS funds on your business activity?

Positive Negative Neutral No opinion N/A

68. How does the retailisation of non-UCITS funds impact on your activity?

High impact Low impact No impactN/A

Acquiring new clients

Entering new markets

Increasing profit margins

Increasing costs

Increasing misselling risk

Increasing AML/KYCconcerns

Other, please specify

113

69. Do you think regulatory frameworks promote or hinder the retailisation of non-UCITS funds?

PROMOTE HINDER DO NOTKNOW

Comments(you can

differentiatebetween thetypes of non-UCITS funds)

N/A

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

114

70. Do you think tax characteristics promote or hinder the retailisation of non-UCITS funds?


Comments(you can


N/A

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

115

71. Do you think cultural preferences promote or hinder the retailisation of non-UCITS funds?


Comments(you can


N/A

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

116

72. Are there barriers in the following Member States hindering the retail distribution of non-UCITS funds? If yes, which ones?

Please tick when appropriate and indicate the non-UCITS product type you are referring to.

Nobarrier

TaxIssues

Fragmentedregulatoryframework

Compliancecosts

Processingcosts

Lack ofdemand

Higherrisk

features

Lack ofpublic

information

Existenceof lockingperiods

Insufficientinformedadvisors

Other Comments

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

117

73. Do you think that your non-UCITS offshore domiciled funds (outside the EU) can be more easilydistributed to the following investors than onshore funds?

YES NO DO NOTKNOW

Why? N/A

HNWI

Mass affluent

Retail investors

74. Please rank the five most suitable non-UCITSfunds types for retail distribution in terms ofrisk/return?

1 being the most suitable

Real estate funds

Hedge Funds

Private Equity /Venture capitalfunds

Guaranteed funds

Other structuredfunds

Funds of hedgefunds


Funds of privateequity funds


118

75. Why?

76. Do you consider the following wrappers as good vehicles to sell non-UCITS products to retailinvestors?

YES NO DO NOTKNOW

Why?

Discretionary / Managed accounts

Pension products


Certificates / structured products

Other, please specify...........................................................

119

77. Please indicate the main motivations for retail investors to invest in non-UCITS funds?

Taxation Higherexpected

return

Lowervolatility

Capitalprotection

Diversification Other Comments

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


78. Are retail investors sufficiently informed about non-UCITS funds?

YES NO DO NOT KNOWN/A

About risks

About performance

About costs

120

79. How would you rate the current advisors/distributors ability to advise non-UCITS funds to retailinvestors?

Good Average Low

Real estate funds

Hedge Funds


Guaranteed funds


Funds of funds


80. Which advisor skills should be upgraded in the context of selling non-UCITS funds to retailinvestors?

Understanding of client needs

Understanding of risk features

Understanding of product components (including the use of derivatives)

Tax issues

Legal requirements


None of the above

121

81. In your opinion which distribution channel will play an increasing role in the retail distribution ofnon-UCITS funds?

Increasing role No change Do not knowWhy?

Retail bank

Private bank

Investment bank

Insurance companies

Fund platforms /supermarkets

IFAs

Stock Exchange

82. Would a harmonised regulatory framework for the retail distribution of non-UCITS products beneeded?

Yes

No

No opinion

83. If yes, for which type(s) of non-UCITS investment funds?

Real estate funds Hedge Funds Private Equity / Venturecapital funds

Guaranteed funds Other structured funds Funds of hedge funds

Funds of real estate funds Funds of private equityfunds


None of the above

122

84. What would you recommand to improve the retail distribution framework of non-harmonised fundsin the EU?

Thank you for taking the time to complete the survey, your input is valuable to us.

Please return the questionnaire to us by email ([email protected])or by fax (+352 49 48 48 2909)

If you experienced any difficulties in filling the questionnaire, please do not hesitate tocontact us.

PricewaterhouseCoopers S.à.r.l.IM Research [email protected]+352 49 48 48 2564

121

APPENDIX G: Questionnaire for distributors

Retailisation of non-harmonised investment fundsin the European Union

The following questionnaire is dedicatedto fund distributors, intermediaries and wrapper managers

Deadline for submission: May 31, 2008

Thank you for your time.Your opinion counts.

122

Retailisation of non-UCITS funds in the EU (Distributors)

Presentation of the study - Useful information to fill in the questionnaire

Further to the European Commission’s tender offer N°MARKT/2007/13/G, PricewaterhouseCoopersLuxembourg has been issued with the conduction of the first study on the retailisation of non-harmonised investment funds ("non-UCITS funds") in the European Union.

The target of the study is threefold: identify the non-UCITS products sold to retail investors, analyse thedistribution channels of those products and finally highlight the current drivers and barriers shaping thisinvestment sector as well as the development perspectives.

Each participant will be asked to provide information on his distribution model of non-UCITS funds.The survey will investigate three potential scenarios:

1) You are a pure distributor/intermediary i.e. you do not distribute non-UCITS funds through wrappers

and/or

2) You are a wrapper intermediary i.e. you market non-UCITS funds in wrappers (e.g. managed accounts,pension products, life insurances, certificates…).

and/or

3) You distribute non-UCITS funds to other intermediaries that subsequently market funds directly or in awrapper format.

For the purpose of the study, we will define:

- Wrappers as “packaged” product or service that enables customers to shelter various kinds of investmentsfrom capital gains tax or income tax payments. Wrappers will be considered as means of distribution ofnon-UCITS funds.

- High Net Worth Individuals (HNWI) as individuals with more than EUR1 million of liquid assets;

- Mass Affluent as individuals with EUR100,000 to EUR1 million of liquid assets;

- Retail investors as individuals with liquid assets of less than EUR100,000 and fund subscription lowerthan EUR10,000;

- Individual investors will consist of HNWI, Mass Affluent and retail investors.

Confidentiality

PricewaterhouseCoopers is one of the world’s largest professional services organisations, and integrity andconfidentiality are paramount to our business. At any time, we deal with a significant number of highly confidentialmatters and this survey is no different. All your answers to this survey are private and confidential. All data you providewill be anonymous for the purposes of processing and analysis.

123

BACKGROUND INFORMATION

*1. What is the name of your company?

2. Who is your parent company?

3. What is your name?

4. What is your job title?

*5. What is your e-mail address?

6. What is your phone number?

*7. Are you?

An investment bank A retail bank

A private bank An insurance company

An IFA A fund platform / supermarket


124

*8. What is your country of domicile?

Belgium France Germany

Ireland Italy Luxembourg

Poland Spain United Kingdom


9. What is the scope of your responses?

European scale

National scale


*10. What is the total amount of your assets under distribution (UCITS and non-UCITS funds)?

2006 2007 2008 (estimates)

Total assets underdistribution (EURm)

*11. What are your sales volumes (UCITS and non-UCITS funds)?

2006 2007 2008 estimates

Total Sales (EURm)

125

*12. What kind of non-UCITS products do you distribute, sell or recommand?

Real estate funds Hedge Funds Private Equity /Venture capital funds

Guaranteed funds Other structured funds Funds of hedge funds




I do not distribute, sell or recommand non-UCITS products

13. If "other non-UCITS funds", please specify

IF YOU DO NOT DISTRIBUTE, SELL OR RECOMMAND NON-UCITS FUNDS: thank you for your interestin this survey. Unfortunately, we were looking for non-UCITS market players and you do not qualify tocomplete the rest of the survey.

Please return the questionnaire to us by email ([email protected]) or by fax +352 49 48 48 2909

14. In your opinion, what is the percentage of your non-UCITS assets under distribution directly orindirectly* (in a wrapper format) held by retail investors at the end of 2007?*

Wrapper products or services may grant investors indirect access to non-UCITS funds (through life insurances, tax wrappers,discretionary/managed accounts...). Therefore, wrappers will be considered as potential means of distribution for the purposeof our survey.

% of non-UCITS AuD

directly held by retail

% of non-UCITS AuD

indirectly held by retail

Real estate funds

Hedge Funds


Guaranteed funds






126

15. In your opinion, what was the percentage of your non-UCITS assets under distribution directly orindirectly (in a wrapper format) held by retail investors at the end of 2006?

% of non-UCITS AuD

directly held by retail

% of non-UCITS AuD

indirectly held by retail

Real estate funds

Hedge Funds


Guaranteed funds






127

16. What are the countries notified for sale of the non-UCITS funds you distribute, according to theirdomicliation country?

Belgium France Germany Ireland Italy Luxembourg Poland Spain UK OtherEuropeancountries

Luxembourgdomiciledfunds

Francedomiciledfunds

Germanydomiciledfunds

Italydomiciledfunds

Irelanddomiciledfunds

UKdomiciledfunds

Spaindomiciledfunds

Belgiumdomiciledfunds

Polanddomiciledfunds

Other EUdomiciledcountries

Offshoredomiciliationcountries,pleasespecify

128

17. How many non-UCITS funds do you distribute?


2006 20071

Increase2

Decrease3

Neutral

Real estate funds

Hedge Funds


Guaranteed funds






129

18. What is the size of your non-UCITS assets under distribution?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

Real estate funds

Hedge Funds


Guaranteed funds






130

19. What are your annual sales of non-UCITS funds?


2006 (inEURm)

2007 (inEURm)

1Increase

2Decrease

3Neutral

Real estate funds

Hedge Funds


Guaranteed funds






131

20. What is the proportion of offshore (outside the European Union) funds you distribute?

(% of offshore non-UCITS funds sales)


2006 20071

Increase2

Decrease3

Neutral

Real estate funds

Hedge Funds


Guaranteed funds






*21. Do you distribute non-UCITS funds to individual investors (HNWI, Mass affluent or retail investors)?

Yes

No

IF YOU DON’T DISTRIBUTE NON-UCITS FUNDS TO INDIVIDUAL INVESTORS, PLEASE GO DIRECTLYTO PAGE 21.

132

*22. What was the final investor base split of your non-UCITS funds sales in Europe in 2006 (in % of non-UCITS sales)?

Please make sure the sum of each row equals 100%

Institutional HNWI Mass affluent Retail

Real estate funds

Hedge Funds


Guaranteed funds






*23. What was the final investor base split of your non-UCITS funds sales in Europe in 2007?(in % ofnon-UCITS sales)


Institutional HNWI Mass affluent Retail

Real estate funds

Hedge Funds


Guaranteed funds






133

24. What was the breakdown of your non-UCITS funds sales to retail investors by country in 2007? (in % of non-UCITS sales to retail investors)



Europeancountries

OutsideEurope


Real estatefunds

HedgeFunds

PrivateEquity / VCfunds

Guaranteedfunds


Funds ofhedge funds

Funds of realestate funds

Funds ofprivate equityfunds


134

25. What was the breakdown of your non-UCITS funds sales to retail investors by country in 2006? (in % of non-UCITS sales to retail investors)



Europeancountries

OutsideEurope


Real estatefunds

HedgeFunds

PrivateEquity / VCfunds

Guaranteedfunds


Funds ofhedgefunds

Funds ofreal estatefunds

Funds ofprivateequityfunds


135

Three scenarios will now be considered:

Scenario 1: You act as a "pure" intermediary between fundmanagers/promoters and individual investors;

And/Or

Scenario 2: You act as a "wrapper" intermediary;

And/Or

Scenario 3: You distribute to other potential intermediaries.

Each participant will be asked if the above-mentioned scenarios applyto his distribution model.

136

Scenario 1:

You act as a "pure" distributor/intermediary (you do not distribute funds throughwrappers)

We are referring to distributors that do not re-package non-UCITS funds into wrapperssuch as life-insurance contracts, tax wrappers, discretionary / managed accounts...

*26. Do you distribute non-UCITS funds directly, i.e. not in a wrapper format, to individual investors(HNWI, mass affluent or retail investors)?

Yes

No

IF YOU DON’T DISTRIBUTE NON-UCITS DIRECTLY, PLEASE GO DIRECTLY TO PAGE 17

27. What are the sales volumes of the non-UCITS funds you offer directly (not wrapped) to individualclients?


2006 (EURm) 2007 (EURm)1

Increase2

Decrease3

Neutral

HNWI

Mass affluent

Retail investors

28. Regarding the proportion of non-UCITS assets that you distribute directly to retail investors, howhas it evolved during the last 3 years? How do you think it will evolve over the next 3 years?


Moderateincrease





137

29. Are your direct sales of non-UCITS funds to retail investors cross border?(in % of annual directretail sales)



2006 (%) 2007 (%)1

Increase2

Decrease3

Neutral

Real estate funds

Hedge Funds


Guaranteed funds






138

Scenario 2:

You act as a wrapper intermediary,i.e. you distribute non-UCITS funds throughwrappers

We are referring here to non-UCITS funds that may be distributed to individuals in awrapper format such as discretionary/managed accounts, life insurance contracts,

certificates....

*30. Do you distribute non-UCITS funds to individual clients (HNWI, mass affluent or retail investors)through wrappers?

Yes

No

IF YOUR ANSWER IS “NO”, PLEASE GO DIRECTLY TO PAGE 21

*31. What kind of wrappers do you offer?

Discretionary / Managed accounts

Pension products


Certificates / structured products

Other personal tax wrappers

If other personal tax wrappers, please specify............................................................

139

32. What are the sales volumes of the non-UCITS funds you offer to individual clients throughwrappers?


2006 (EURm) 2007 (EURm)1

Increase2

Decrease3

Neutral

HNWI

Mass affluent

Retail investors

33. What was the breakdown of your sales of non-UCITS funds to individuals by wrappers in 2007?

(in EURm)

Realestatefunds

Hedgefunds

Privateequity /venturecapitalfunds

Guaranteedfunds

Otherstructured

funds

Fundsof funds

Othernon-

UCITSfunds


Pension products




140

34. What was the breakdown of your sales of non-UCITS funds to individuals by wrappers in 2006?

(in EURm)

Realestatefunds

Hedgefunds

Privateequity /venturecapitalfunds

Guaranteedfunds

Otherstructured

funds

Fundsof funds

Othernon-

UCITSfunds


Pension products




35. Regarding your proportion of wrapped non-UCITS funds sold to retail investors, how has it evolvedduring the last 3 years? How do you think it will evolve over the next 3 years?


Moderateincrease





141

36. What percentage of these non-UCITS funds sales to retail investors through wrappers are crossborder?



2006 (%) 2007 (%)1

Increase2

Decrease3

Neutral


Pension products




142

Scenario 3:

You distribute non-UCITS funds to other intermediaries that may market funds toindividual investors (directly or in a wrapper format)

*37. Do you sell non-UCITS funds to other intermediaries that may subsequently market your funds,directly or in a wrapper format, to individuals?

Yes, to distributors/intermediaries (market funds directly)

Yes, to wrapper intermediaries (market funds in wrappers)

No

IF YOUR ANSWER IS “YES, TO DISTRIBUTORS/INTERMEDIARIES (MARKET FUNDSDIRECTLY)”, PLEASE GO DIRECTLY TO QUESTION 45 (PAGE 25)

IF YOU’RE YOUR ANSWER IS “NO”, PLEASE GO DIRECTLY TO PAGE 26

*38. What kind of players are these wrapper intermediaries?

Retail banks Private banks Investment banks


Insurance companies Funds of funds managers

IFAs Other, please specify....................

143

39. What are the sales volumes of the non-UCITS funds you distribute to those kinds of wrapperintermediaries i.e. intermediaries who may market the non-UCITS funds they bought you, throughwrappers?


2006 (EURm) 2007 (EURm)1

Increase2

Decrease3

Neutral

Real estate funds

Hedge Funds


Guaranteed funds






144

40. What kind of wrappers are used by these wrapper intermediaries?

Fundsof funds

Personaltax

wrappers

Pensionproducts

Discretionary/managedaccounts

Certificates Lifeinsurancecontracts

Retail banks

Private banks

Investment banks


Insurance companies

Funds of fundsmanagers

IFAs

*41. Do you know the final investor base split of the non-UCITS funds you distribute to wrapperintermediaries?

Yes

No

IF YOUR ANSWER IS “NO”, PLEASE GO DIRECTLY TO QUESTION 45 (PAGE 25)

145

42. What was the final investor base split of the non-UCITS funds you distribute to these wrapperintermediaries in 2007? (in % of sales)Please make sure the sum of each row equals 100%.

Institutionals HNWI Mass affluent Retail investors

Real estate funds

Hedge Funds


Guaranteed funds






146

43. What was the final investor base split of the non-UCITS funds you distribute to these wrapperintermediaries in 2006? (in % of sales)Please make sure the sum of each row equals 100%.

Institutionals HNWI Mass affluent Retail investors

Real estate funds

Hedge Funds


Guaranteed funds






44. Regarding the proportion of non-UCITS assets that you distribute to wrapper intermediaries thatsubsequently sell funds in a wrapper format to retail investors, how has it evolved during the last 3years? How do you think it will evolve over the next 3 years?


Moderateincrease





147

45. Could you please indicate the contact information (company name, contact name, phone number, e-mail...) of these intermediaries?

For the purpose of the present study, we shall reserve the right to contact your intermediaries to get a completeas possible picture of the distribution chain of your non-UCITS funds.

148

Market dynamics: trends and barriers

46. In your opinion, is the retailisation of non-UCITS funds a real trend and if so, is it primarily driven bythe demand or by the supply side?

No retailisationtrend

Supply driven Demand drivenComments

Real estate funds

Hedge Funds


Guaranteed funds






149

47. Is the distribution of non-UCITS funds to retail investors one of your strategic objectives?

YES NOWhy?

Real estate funds

Hedge Funds


Guaranteed funds






150

48. Are some of your non-UCITS specifically targeting individual investors? If yes, could you pleaseprovide us with the names of these funds?

HNWI Mass affluent RetailFund names

Real estate funds

Hedge Funds


Guaranteed funds






151

49. If you do not currently offer non-UCITS funds to retail investors, would you plan to do so in thefuture?

YES NO DO NOT KNOWComments

Real estate funds

Hedge Funds


Guaranteed funds






50. Which client categorisation do you use to segment your client base?

MiFID (retail client, professional client, eligible counterparty)

Prospectus Directive (qualified, unqualified investors)


51. How would you assess the impact of the retailisation of non-UCITS funds on your business activity?

Positive Negative Neutral No opinion N/A

152

52. How does the retailisation of non-UCITS funds impact on your activity?

High impact Low impact No impactN/A

Acquiring new clients

Entering new markets

Increasing profit margins

Increasing costs

Increasing misselling risk

Increasing AML/KYCconcerns

Other, please specify

53. Do you think regulatory frameworks promote or hinder the retailisation of non-UCITS funds?


Comments(you can


N/A

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

153

54. Do you think tax characteristics promote or hinder the retailisation of non-UCITS funds?


Comments(you can


N/A

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

154

55. Do you think cultural preferences promote or hinder the retailisation of non-UCITS funds?


Comments(you can


N/A

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

155

56. Are there barriers in the following Member States hindering the retail distribution of non-UCITS funds? If yes, which ones?

Please tick when appropriate and indicate the non-UCITS product type you are referring to.

Nobarrier

TaxIssues

Fragmentedregulatoryframework

Compliancecosts

Processingcosts

Lack ofdemand

Higherrisk

features

Lack ofpublic

information

Existenceof lockingperiods

Insufficientinformedadvisors

Other Comments

Belgium

France

Germany

Ireland

Italy

Luxembourg

Poland

Spain

UK

156

57. Do you think that your non-UCITS offshore domiciled funds (outside the EU) can be more easilydistributed to the following investors than onshore funds?

YES NO DO NOTKNOW

Why? N/A

HNWI

Mass affluent

Retail investors

58. Please rank the five most suitable non-UCITSfunds types for retail distribution in terms ofrisk/return?

1 being the most suitable

Real estate funds

Hedge Funds


Guaranteed funds



Funds of real estate funds



157

59. Why?

60. Do you consider the following wrappers as good vehicles to sell non-UCITS products to retailinvestors?

YES NO DO NOT KNOWWhy?

Funds of funds

Personal tax wrappers

Insurance contracts

Pension products

Discretionary / managedaccounts

Certificates

158

61. Please indicate the main motivations for retail investors to invest in non-UCITS funds?

Taxation Higherexpected

return

Lowervolatility

Capitalprotection

Diversification Other Comments

Real estate funds

Hedge Funds


Guaranteed funds






62. Are retail investors sufficiently informed about non-UCITS funds?

YES NO DO NOT KNOWN/A

About risks

About performance

About costs

159

6. How would you rate the current advisors/distributors ability to suggest non-UCITS funds to retailinvestors?

Good Average Low

Real estate funds

Hedge Funds


Guaranteed funds






64. Which advisor skills should be upgraded in the context of selling non-UCITS funds to retailinvestors?

Understanding of client needs Understanding of risk features

Understanding of product components(including the use of derivatives)

Tax issues

Legal requirements Other, please specify..............................

None of the above

160

65. In your opinion which distribution channel will play an increasing role in the retail distribution ofnon-UCITS funds?

Increasing role No change Do not knowWhy?

Retail bank

Private bank

Investment bank

Insurance companies


IFAs

Stock Exchange

66. Would a harmonised regulatory framework for the retail distribution of non-UCITS products beneeded?

Yes

No

Do not know

67. If yes, for which products?

Real estate funds Hedge Funds

Private Equity / Venture capital funds Guaranteed funds

Other structured funds Funds of hedge funds

Funds of real estate funds Funds of private equity funds


None of the above

161

68. What would you recommand to improve in the retail distribution framework of non-harmonisedfunds in the EU?

Thank you for taking the time to complete the survey, your input is valuable to us.

Please return the questionnaire to us by email ([email protected])or by fax (+352 49 48 48 2909)

If you experienced any difficulties in filling the questionnaire, please do not hesitate tocontact us.

PricewaterhouseCoopers S.à.r.l.IM Research [email protected]+352 49 48 48 2564

Documents

The retailisation of non-harmonised investment funds in ...ec.europa.eu/internal_market/investment/docs/other_docs/annex_non... · Appendices The retailisation of non-harmonised investment